VAT Concepts Explained: Agent (Disclosed agent) vs Commissionaire (Undisclosed agent)

Executive Summary

The classification of a business as a disclosed agent, commissionaire, or undisclosed agent has profound and often complex implications for Value Added Tax (VAT) and Goods and Services Tax (GST) obligations globally. As stated in the source, “Same commercial deal, totally different VAT result.” This briefing examines how this classification dictates who is deemed the supplier, who accounts for output tax, and ultimately, the tax outcomes, influencing VAT registration, invoicing, place-of-supply rules, and cash flow.

While EU and civil-law jurisdictions typically treat an intermediary “acting in his own name but on behalf of another” as making two supplies (a “commissionaire” model), some common-law systems historically differed. However, driven by principles of tax neutrality, combating evasion, and ensuring legal certainty, there’s a global trend towards harmonizing these rules, particularly for digital platforms. Recent EU legislation (e.g., Implementing Reg 282/2011 Art. 9a, EU e-commerce package) and extensive CJEU case law have solidified the “deemed supplier” concept, forcing businesses to align contractual forms with operational substance. Mischaracterization can lead to significant VAT gaps, audit exposures, and unintended tax liabilities. This document provides a comprehensive review of definitions, legal frameworks, key tests, global practices, critical case law, operational implications, challenges, and a practical playbook for businesses.

The Core Challenge: One Deal, Different Tax Outcomes

The fundamental challenge in VAT/GST for intermediated transactions is that “changing who is treated as supplying whom (principal vs agent) can flip a transaction’s VAT/GST outcome.” (Source A). This distinction is critical because it determines the entire VAT chain: who is liable for output tax, who can recover input tax, the place of supply, and ultimately, where the tax revenue accrues. The complexity arises because “tax laws diverge on these concepts” globally (Source B), and subtle differences in contractual wording or operational conduct can dramatically alter VAT liabilities.

Key Definitions and Legal Framework

The distinction primarily lies between disclosed agents and intermediaries acting in their own name.

2.1 Disclosed Agent

Definition: “A person or entity empowered to act on behalf of a principal in dealings with third parties.” In this arrangement, “the third-party customer knows the agent is acting for a named principal.” (Source C.1)
VAT Treatment: The principal is the supplier to the customer. The agent provides a separate service (e.g., facilitating the sale) to the principal, earning a commission or fee. The agent’s commission is subject to VAT as a service to the principal.
Invoicing: The principal typically issues the invoice to the end customer. The agent invoices the principal for their commission plus VAT.

2.2 Undisclosed Agent / Commissionaire

Definition: An intermediary who “acts in their own name (without revealing the principal) but on another’s behalf in arranging a supply.” In civil-law systems, the term “commissionaire” is used for such an agent. (Source C.1)
Legal Fiction (EU VAT Law): Under EU VAT law, a legal fiction applies:
- Services: Article 28 of Directive 2006/112/EC states that where a taxable person “acting in his own name but on behalf of another” takes part in a supply, they are “deemed to have received and supplied that supply themselves.” (Source C.1)
- Goods: Article 14(2)(c) of the same Directive applies a similar principle for goods, treating a commissionaire arrangement as “a supply of goods to and by the intermediary.” (Source C.1)
VAT Treatment: The commissionaire/undisclosed agent is treated as a principal for VAT purposes. This creates two supplies:
- The original supplier (principal) sells to the intermediary.
- The intermediary (acting as a reseller) sells to the final customer. The intermediary must charge output VAT on the full sale to the customer and can usually recover input VAT charged by the actual supplier. The intermediary’s “commission” is effectively “embedded as the margin between the two supplies.” (Source C.1)

2.3 Why the Concept Exists (Policy Logic)

These rules aim to ensure VAT is collected correctly and neutrally, regardless of intermediated chains (Source C.2).

Tax Neutrality and Equity: To ensure “VAT should yield the same result whether a product is sold directly or via an intermediary.” (Source C.2) The commissionaire rule prevents distortions, such as an intermediary providing a VAT-exempt introductory service where the underlying supply is taxable, or altering the place of taxation arbitrarily.
Avoiding VAT Gaps and Evasion: Without the “undisclosed agency fiction,” VAT could go uncollected, especially in cross-border situations. This logic spurred “Article 9a of Reg 282/2011 to combat scenarios where electronic platforms (acting as intermediaries) might otherwise avoid being treated as suppliers,” thereby ensuring VAT collection on B2C digital sales (Source C.2).
Legal Certainty: Clear rules simplify compliance by helping businesses determine “who must register and report VAT in complex supply chains.” (Source C.2)
Historical Alignment: The EU’s commissionaire concept originates from civil law. Historically, common law (e.g., UK pre-2000) treated even undisclosed agents such that the primary supply remained between the original supplier and customer, creating cross-border VAT issues. Jurisdictions like the UK later “changed their VAT laws (in 2000) to adopt the commissionaire treatment for undisclosed agents in most cases” to align practices. (Source C.2)

How to Distinguish: Key Tests and Criteria

Determining the correct classification requires examining contractual terms and “actual conduct.” (Source C.3)

Does the intermediary act in the name of the principal (explicitly as agent)?YES (Disclosed Agent): Principal supplies to customer; agent provides a separate service to principal. The customer’s invoice names the principal as supplier.
NO (Undisclosed Agent/Commissionaire): Intermediary acts in its own name. The intermediary is “deemed to buy and resell the product/service for VAT.” (Source C.3) Two supplies are created (principal to intermediary, intermediary to customer).
What do the invoices and contracts show? This is a crucial practical test. “If the invoice to the customer is issued by the intermediary in its own name, that strongly indicates an undisclosed agent scenario.” Conversely, if the invoice clearly names the principal, it points to a disclosed agent. (Source C.3) EU Implementing Reg 282/2011 Art.9a(1) allows a platform to avoid the “deemed supplier” presumption only if it “explicitly indicates the actual provider as the supplier on documents and contracts.” (Source C.3)
Does the intermediary have authority to change key terms or transfer title? If the intermediary sets prices, negotiates terms, or “takes on risks (like stock risk, customer default risk) typically borne by a seller,” it suggests acting as a principal. The EU test considers whether the intermediary “appears as the supplier” from the customer’s perspective. (Source C.3)
Is there a formal commissionaire agreement? In civil-law countries, a “commission contract” explicitly defines this relationship.
Substance Over Form: Tax authorities “look beyond contract labels if needed to see the economic reality.” (Source C.3) Simply calling someone an “agent” is not decisive. Courts (e.g., CJEU Newey case) can recharacterize arrangements if the substance doesn’t match the form, especially if there’s evidence of abuse of law.

Global Landscape: Divergence and Convergence

While approaches vary, “the global trend aligns with the principle that when an intermediary acts as the face of the transaction, they bear VAT responsibilities.” (Source D.2)

4.1 EU Approach (Harmonized Framework)

The EU has a unified approach, codified in the VAT Directive 2006/112/EC and its Implementing Regulation, and clarified by extensive CJEU case law. (Source D.1)

Directive Provisions: Article 28 (services) and Article 14(2)(c) (goods) formalize the undisclosed agency principle. Any intermediary “acting in their own name” triggers the VAT fiction of two supplies.
Implementing Regulation 282/2011: Article 9a (added 2015) specifically targets electronic services platforms, creating a presumption that they act as undisclosed agents unless they explicitly show the actual supplier. The 2021 e-commerce VAT package added Article 14a, extending this “deeming principle to online marketplaces for goods.” (Source D.1)
Neutrality Emphasis: EU law aims for VAT neutrality, ensuring VAT outcomes don’t depend on minor contractual differences, and that the VAT character (taxable/exempt) of the underlying supply carries through the deemed supplies. (Source D.1)
Common Interpretation Criteria: EU countries follow CJEU guidance, focusing on customer perception, term-setting, and invoicing.

4.2 UK (post-Brexit, but historically EU-aligned)

The UK retains similar rules in VATA 1994 Section 47 (mirroring Article 28), compulsorily treating undisclosed agents as principals for VAT in most cases, especially cross-border. “HMRC manuals explicitly acknowledge the difference between UK common law… and civil law… and instruct that VAT should follow the commissionaire model for undisclosed agents.” (Source D.1) The UK also adopted “marketplace as deemed supplier” rules for digital services and online sales.

4.3 Comparative Notes from Non-EU VAT/GST Countries

Australia (GST): Australian GST law explicitly addresses agents. If an agent acts in its own name, it “might be treated as making a supply to the customer and a corresponding supply from principal to agent.” (Source D.2)
Singapore (GST): Closely follows the disclosed vs. undisclosed agent concepts, treating undisclosed agents similarly to the EU/UK.
Gulf Cooperation Council (e.g., UAE, KSA): Differentiate disclosed vs. undisclosed agents. UAE amendments (2023) introduced rules where a foreign principal may be “deemed resident in the UAE for VAT purposes” if a local agent regularly negotiates/concludes contracts or maintains stock. (Source D.2)
India (GST): Defines agent in CGST Act. Schedule I deems a transfer of goods between principal and agent taxable “if the agent will supply those goods further in their own name.” The “crucial test is invoice issuance.” (Source D.2)
China and East Asia: China has “commission agency” concepts, especially for import/export. If an intermediary invoices the buyer directly, authorities may regard it as a separate domestic sale to the intermediary.
Latin America: Many countries rely on civil and commercial law. Brazil’s Civil Code distinguishes agents and commissionaires. For ICMS (goods VAT), a commissionaire selling in their own name on behalf of a foreign principal might trigger import ICMS.

Key CJEU Case Law

These landmark cases illustrate the application and evolution of agent/principal rules.

Case 1: Auto Lease Holland BV (C‑185/01, 2003) – Fuel Cards
- Holding: Auto Lease, despite never physically touching the fuel, was deemed a commissionaire buying and supplying fuel. Its contractual and financial interposition meant it “took part in the supply in its own name.” (Source E)
- Takeaway: Intermediaries can be deemed suppliers if they control billing and assume obligations, even without physical possession.
Case 2: Henfling (C‑464/10, 2011) – Betting agency, exemption
- Holding: The VAT exemption for betting extended through the commissionaire. Applying the fiction, the principal’s exempt betting service was deemed supplied to the agent, who then supplied it (also exempt) to gamblers. The agent’s commission was not a separate taxable service. (Source E)
- Takeaway: Article 28 ensures VAT treatment (exemption/taxability) flows through the intermediary’s deemed supply.
Case 3: Newey (Ocean Finance) (C‑653/11, 2013) – Substance over form
- Holding: The CJEU ruled that tax authorities “must look at economic and commercial reality over contractual form if the latter is wholly artificial and aimed solely at tax avoidance.” (Source E)
- Takeaway: Artificially structured agent-principal arrangements purely for VAT advantage may be disregarded under abuse of law doctrine. Operational substance must match contractual form.
Case 4: Fenix (OnlyFans) (C‑695/20, 2023) – Platforms as deemed suppliers
- Holding: The CJEU upheld Article 9a of Reg 282/2011 as valid, confirming that digital platforms are presumed to act in their own name when facilitating digital services, unless they explicitly indicate the actual supplier. (Source E)
- Takeaway: Digital platforms are often treated as deemed suppliers. If a platform orchestrates key elements of the supply, it bears full VAT liability, even if users know the underlying seller’s identity.
Case 5: X (App Store Commissionaire) (C‑101/24, 2025) – Retroactive Art. 28
- Holding: The CJEU applied Article 28 directly to an App Store, even pre-2015 (before Art.9a), deeming it an undisclosed agent because its interface made customers perceive the store as the seller. (Source E)
- Takeaway: Lack of explicit rules does not absolve platforms; Article 28’s broad language can capture them. Customer-facing presentation of the transaction is crucial for VAT status.
Case 6: Digital Charging Solutions (DCS) (C‑60/23, 2024) – EV charging networks
- Holding: DCS, an EV charging intermediary, was found to buy and sell electricity (a good) as a commissionaire under Article 14(2)(c). DCS’s control over contracting and appearing as the supplier to the customer meant it was deemed to receive and transfer title to the goods. (Source E)
- Takeaway: Extends commissionaire principles to new sectors (e.g., energy/tech) and confirms that intangibles like electricity can have commissionaire chains. Highlights the importance of how the intermediary interposes itself and appears to the customer.

Operational Implications for Businesses

Misjudging an agent/principal classification can have significant operational and financial impacts:

VAT Registration and Reporting: Determines who registers for VAT in each jurisdiction. “If you use a disclosed agent in X, you as the principal may need a VAT registration there.” (Source G) Conversely, a commissionaire model might mean the commissionaire registers, avoiding registration for the principal.
Invoicing and Documentation: Dictates whose name and VAT number appear on invoices. Inaccurate invoicing can lead to customers being “denied VAT deductions by tax authorities.” (Source G)
Cash Flow and Financial Exposure: Acting as a (deemed) principal means collecting output VAT on the full sale and potentially pre-financing it. “Timing differences in those flows can affect cash.” (Source G) Agents generally only face VAT on their commission, reducing exposure.
Place of Supply & Cross-Border Complexity: Affects where VAT is due. Mischaracterization can lead to applying wrong place-of-supply rules, impacting zero-rating, import duties, and who is the importer/exporter of record.
Input VAT Recovery: Determines who is entitled to recover input VAT on costs. A commissionaire can claim input VAT on costs of the supply (e.g., Auto Lease), whereas for a disclosed agency, the principal generally claims input VAT on related costs.
Audit and Compliance Complexity: “Tax auditors often target agent/principal issues because errors are common and can yield significant underpaid VAT.” (Source G) Robust documentation is essential to defend VAT treatment.
E-invoicing/E-reporting Considerations: Requires systems to correctly reflect supplier details in real-time reporting. Mistakes can lead to rejected e-invoices or transaction blockage.

Main Challenges, Controversies, and Risks

Businesses face several grey areas and challenges:

Legal Interpretation Challenges: Complexity in distinguishing agent from principal for hybrid arrangements (franchises, drop-shipment, online platforms). CJEU interpretations can evolve, creating uncertainty.
Distinguishing Genuine vs. Sham Arrangements: Tax authorities scrutinize arrangements created “purely for tax advantage.” The “abuse of law doctrine (as in Newey/Ocean Finance) is itself a challenge: it’s inherently a bit subjective.” (Source H)
Process/System Challenges: Implementing correct VAT treatment in ERP systems requires flexible configurations, different invoice workflows, and potentially multiple VAT registrations. E-invoicing mandates add pressure.
Financial vs. VAT Treatment Misalignment: Accounting standards may treat a transaction differently (e.g., agent for revenue recognition) than VAT law (principal for VAT), complicating reconciliation.
Industry-specific Issues: Sectors like travel (TOMS), insurance, and finance have unique rules, where subtle changes in roles can impact exemptions or applicable schemes.
Audit and Dispute Trends: Increased international information exchange means mismatches are easily identified. Digital economy platforms are a hot audit area.
Permanent Establishment (PE) Confusion: An agent’s activities can trigger a direct tax PE under updated OECD BEPS rules, even if VAT is efficiently managed through a commissionaire. This requires a holistic tax approach.
New Economy Models: Gig economy and crypto transactions continuously test traditional classifications, creating uncertain VAT character.

How to Anticipate and Manage: A Taxpayer Playbook

Proactive steps are crucial to manage risks:

Governance & Controls: Establish clear policies for intermediaries; involve tax/finance early; implement billing system controls; ensure internal audit.
Contracting & Operating Model Alignment: Ensure contracts explicitly reflect the intended VAT treatment (e.g., “Agent acts in the name and for the account of Principal”). Align operational conduct with contractual terms.
Documentation Package: Maintain robust records: contracts, invoices (showing disclosure), rulings, and transactional records to demonstrate consistency.
Monitoring & Periodic Reassessment: Regularly review arrangements, especially with law changes or business model evolution. Monitor CJEU rulings and local law changes.
Systems and Tech Solutions: Configure ERP/tax engines for correct flows, multiple VAT registrations, OSS returns, and specific tax codes.
Training and SOPs: Train sales, procurement, and accounting on agent/principal differences and correct procedures, including how to handle pass-through expenses. Instruct customer-facing staff on proper messaging.
Key Performance Indicators (KPIs) and Monitoring: Develop KPIs to track correct VAT treatment and identify anomalies.
Contingency Planning: Plan for reclassification scenarios, quantify exposure, and consider indemnity clauses or voluntary disclosure.

Common Misconceptions (and the Reality)

Misconception: “If our contract says ‘agency’, it’s automatically a disclosed agency for VAT.”
- Reality: “VAT treatment is based on actual behavior and contract terms in substance, not just labels.” (Source J)
Misconception: “Using a commissionaire in a country means the foreign company has no tax presence there.”
- Reality: A commissionaire can localize VAT, but may still create a corporate Permanent Establishment (PE) under updated international rules, triggering income tax.
Misconception: “We don’t need to charge VAT on flows between a principal and agent.”
- Reality: An agent’s commission is almost always a taxable service. If an undisclosed agent, the principal’s “payment” is consideration for an intermediate supply, subject to VAT.
Misconception: “If it’s B2B, it doesn’t matter – the VAT is recoverable anyway.”
- Reality: Incorrect classification can lead to missed zero-rating, unexpected VAT liabilities, cash flow issues, and penalties, even if ultimately recoverable by the customer.
Misconception: “A digital platform is always just an intermediary, not the seller.”
- Reality: “Modern VAT laws increasingly treat platforms as deemed sellers for certain transactions,” especially in the EU and UK for B2C digital sales and marketplace goods. (Source J)
Misconception: “If we reimburse our agent’s expenses at cost, there’s no VAT because it’s just a reimbursement.”
- Reality: Strict rules (e.g., “pure agent” criteria) apply for reimbursements to be outside VAT scope. Unless structured as a true disbursement, they are often part of the agent’s service or a separate re-supply subject to VAT.

Top 10 Takeaways

Same deal, different VAT: The choice of agency model fundamentally changes VAT outcomes.
Disclosed vs. Undisclosed: Disclosed agent = principal supplies to customer; undisclosed agent (commissionaire) = intermediary is deemed to buy and resell.
Global variations, but converging: While specifics vary, the trend is towards treating “acting in own name” as a deemed supply, especially for digital platforms.
EU is harmonized & expanding: EU law and CJEU cases (e.g., OnlyFans, App Store, EV charging) are actively solidifying the “deemed supplier” rule.
Documentation is paramount: Contracts, invoices, and customer communications must clearly and consistently reflect the intended VAT role.
Operational impact is broad: Affects registrations, invoicing, cash flow, place of supply, input tax, and ERP systems.
Misclassification is risky: Leads to assessments, penalties, and disputes. Auditors intensely scrutinize these arrangements.
Holistic tax analysis needed: Integrate VAT planning with corporate tax (PE) and regulatory considerations.
Substance over form: Tax authorities will look beyond labels to economic reality; purely tax-driven structures risk recharacterization.
Proactive management saves money: Upfront structuring, clear processes, training, and continuous monitoring are vital to mitigate risks.

Board-Level Summary

VAT Strategy & Business Model: Strategic decisions on third-party engagements directly impact VAT/GST liabilities and costs. Business models must integrate indirect tax efficiency.
Global Consistency & Compliance: International operations require adherence to diverse, complex intermediary rules. Inconsistency leads to risk exposure.
Risks & Provisions: The Board should be aware of recharacterization risks (especially in digital sectors) and quantify potential exposures, considering appropriate provisions or tax insurance.
System Investments: Ongoing investment in IT and billing systems is critical to adapt to evolving VAT laws (e.g., e-invoicing, marketplace liability) and ensure compliance.
Holistic Structuring: Cross-functional collaboration (tax, legal, commercial) is essential for new market entries or channel changes to optimize overall tax outcomes (VAT, customs, corporate tax).

Tax Team Action Plan

Inventory All Intermediary Arrangements: Create a global matrix of all such relationships and their current VAT treatment.
Risk Assessment: Review high-risk arrangements for potential mischaracterization and quantify exposure.
Align Contracts & Reality: Work with Legal to ensure contracts align with operational substance and intended VAT treatment.
Training Sessions: Conduct regular training for sales, operations, and accounting on agent/principal distinctions and correct procedures.
Update SOPs/Guidelines: Revise internal documentation to reflect clear instructions for VAT handling in intermediary scenarios.
Systems Configuration: Collaborate with IT to correctly configure ERP/billing systems for multi-party flows and new VAT codes.
E-invoicing Readiness: Verify that e-invoicing processes accurately reflect agent/principal roles and details.
Monitoring Legal Changes: Assign a team member to track global indirect tax changes impacting intermediaries.
Liaise with Key Partners: Establish clear communication and agreements on VAT responsibilities with third-party platforms and agents.
Contingency / Corrections: Develop a plan for addressing errors, including voluntary disclosure, customer notification, and documentation for penalty mitigation.

Article

A. Title: VAT/GST Treatment of Agents vs Commissionaires vs Undisclosed Agents: One Deal, Different Tax Outcomes

“Same commercial deal, totally different VAT result.” – This article examines how changing who is treated as supplying whom (principal vs agent) can flip a transaction’s VAT/GST outcome. We provide a global and EU-focused analysis, covering definitions, legal tests, key CJEU cases, country-specific practices, and practical guidance. [marcusward.co], [kpmg.com]

B. Executive Summary (150–200 words):
In VAT/GST, whether a business acts as a disclosed agent, commissionaire, or undisclosed agent can fundamentally alter who is deemed the supplier and who must account for output tax. Globally, tax laws diverge on these concepts: many EU and civil-law jurisdictions treat an undisclosed intermediary (e.g. a commissionaire) as buying and reselling goods or services (two supplies), whereas historically some common-law systems (like pre-2000 UK) kept the supply between the principal and customer even with an undisclosed agent. The EU VAT Directive formalizes the distinction (Art. 14(2)(c) for goods, Art. 28 for services) so that an intermediary “acting in his own name but on behalf of another” is deemed to receive and supply the goods or services. This affects VAT registration obligations, invoicing, place-of-supply, and who remits tax. Recent CJEU cases (e.g. on digital platforms) and new rules (e.g. Implementing Reg 282/2011 Art. 9a, EU e-commerce package) have expanded these principles. Multinational businesses must grasp these nuances to avoid VAT gaps, audit exposures, or unintended permanent establishment issues. We discuss the concepts, compare 12+ jurisdictions (EU and beyond), and provide practical checklists for governance, systems, and documentation to proactively manage these risks. [marcusward.co], [marcusward.co] [kpmg.com] [gov.uk], [gov.uk] [marcusward.co], [gov.uk]

C. Concept Definition and Legal Framework
C.1 Definition of Agent vs Commissionaire vs Undisclosed Agent:

Agent (Disclosed Agent): A person or entity empowered to act on behalf of a principal in dealings with third parties. In a disclosed agency, the third-party customer knows the agent is acting for a named principal. The principal is the supplier to the customer, while the agent’s role is to arrange the supply and earn a commission or fee from the principal. For VAT, the sale to the customer is made by the principal, and the agent provides a separate service (e.g. facilitating the sale) to the principal, usually invoicing the principal for commission plus VAT. The agent’s commission is subject to VAT as a service to the principal (with input tax recovery typically allowed for the principal, per normal rules). The EU VAT Implementing Regulation and national rules often call this an agent acting “in the name and on behalf of” a principal (meaning fully disclosed agency). [marcusward.co] [marcusward.co], [marcusward.co] [simmons-simmons.com], [simmons-simmons.com]
Undisclosed Agent / Commissionaire: An intermediary who acts in their own name (without revealing the principal) but on another’s behalf in arranging a supply. In civil-law systems, the term commissionaire is used for an agent who acts in their own name (the customer believes they are dealing with the intermediary as the seller) but for the account of a principal. Under EU VAT law, this is governed by a legal fiction: Article 28 of Directive 2006/112/EC states that where a taxable person “acting in his own name but on behalf of another” takes part in a supply, they are deemed to have received and supplied that supply themselves. Likewise, for goods, Article 14(2)(c) treats a commissionaire arrangement (sale or purchase commission) as a supply of goods to and by the intermediary. In practice, the commissionaire/undisclosed agent is treated as a principal for VAT: the original supplier sells to the intermediary (first supply), and the intermediary (acting as a reseller) sells to the final customer (second supply). The undisclosed agent must charge output VAT on the full sale to the customer and can usually recover input VAT charged by the actual supplier. What would otherwise be the agent’s commission is embedded as the margin between the two supplies. Importantly, the underlying principal is not making the direct supply to the customer for VAT purposes under this model. (Note: In some jurisdictions, commissionaire refers specifically to goods, but here we use it broadly for undisclosed agency situations in VAT.) [marcusward.co], [marcusward.co] [gov.uk], [gov.uk] [kpmg.com] [marcusward.co], [kpmg.com] [marcusward.co]

C.2 Why the Concept Exists (Policy Logic):
These rules exist to ensure VAT is collected properly and neutrally, regardless of intermediated distribution chains. The policy logic includes:

Tax Neutrality and Equity: VAT should yield the same result whether a product is sold directly or via an intermediary. Without the undisclosed agency fiction, an intermediary could be seen as providing an exempt financial or mere introductory service (altering VAT due) or shift the place-of-taxation arbitrarily. The commissionaire rule prevents distortions by taxing the intermediary’s sale just like a normal sale by the principal. This was important, for example, in Henfling (2011), where an agent selling exempt betting tickets was treated as part of the exempt supply chain rather than a separate taxable service – preserving neutrality (the agent’s commission escaped VAT because the underlying betting was VAT-exempt). [gov.uk], [vatupdate.com] [vatupdate.com], [vatupdate.com]
Avoiding VAT Gaps and Evasion: If an undisclosed intermediary were not treated as making a supply, VAT could go uncollected on the margin or authorities might lose track of the transaction, especially in cross-border situations. The EU introduced Article 9a of Reg 282/2011 to combat scenarios where electronic platforms (acting as intermediaries) might otherwise avoid being treated as suppliers – thereby ensuring platforms charge VAT on B2C digital sales where the actual supplier is abroad or unidentified. This was motivated by cases of businesses routing services through low-VAT jurisdictions; deeming the platform as supplier closes that loophole.
Legal Certainty: Clear rules help businesses determine who must register and report VAT in complex supply chains. If an agent acts in their own name, treating them as the supplier simplifies compliance – they issue the tax invoice to the customer and collect VAT, rather than relying on an often foreign or multiple principals to do so. The law thereby aligns VAT obligations with the party appearing to the customer as the seller, which is practical for tax collection. [kpmg.com], [kpmg.com]

Moreover, historically, differences in legal frameworks (common law vs civil law) led to mismatches. The EU’s commissionaire concept originates in Roman civil law (e.g. French Code de Commerce) where an undisclosed agent is legally a principal in the sale to third parties. Common law (UK) treated even undisclosed agents as agents such that the primary supply legally remained between the original supplier and customer. This discrepancy caused cross-border VAT headaches – e.g. a UK undisclosed agent might not charge local VAT while an EU commissionaire would. To align practices and avoid non-taxation or double taxation, jurisdictions like the UK changed their VAT laws (in 2000) to adopt the commissionaire treatment for undisclosed agents in most cases. The overall policy aim is a uniform VAT system where the tax result follows the economic reality of how goods/services reach the consumer, rather than formal contract labels. [gov.uk], [gov.uk] [gov.uk] [pinsentmasons.com], [kpmg.com]

C.3 Key Tests and Criteria (Decision Tree for Agency vs Own-Name):
Determining whether a specific arrangement is a disclosed agency or an undisclosed agency/commissionaire requires looking at contracts and actual conduct. Key criteria and a simplified decision approach: [marcusward.co], [pinsentmasons.com]

Does the intermediary act in the name of the principal (explicitly as agent)?
- If YES: The intermediary is a disclosed agent. The principal is treated as making the supply to the end customer, and the agent provides a separate facilitation service to the principal. Output VAT: charged by principal to customer on full value; agent charges VAT on commission to principal. The customer’s invoice typically shows the principal as supplier (often a legal requirement to maintain “disclosed” status). [marcusward.co] [marcusward.co], [marcusward.co] [bcajonline.org], [bcajonline.org]
- If NO: The intermediary likely acts in its own name (the customer is not clearly made aware of the principal). This is an undisclosed agent/commissionaire scenario. The intermediary is deemed to buy and resell the product/service for VAT. Output VAT: the intermediary must charge VAT to the customer on the full price; the principal charges VAT (if applicable) on the sale to the intermediary. Both invoices (principal→intermediary, intermediary→customer) reflect taxable supplies. [marcusward.co], [marcusward.co] [marcusward.co], [kpmg.com] [marcusward.co]
What do the invoices and contracts show? A practical test used (for goods) in many jurisdictions is: Who issues the invoice to the final customer, and in whose name? If the invoice to the customer is issued by the intermediary in its own name, that strongly indicates an undisclosed agent scenario (two supplies). For example, India’s GST explicitly says if an agent issues the invoice in the agent’s name, the principal’s transfer of goods to the agent is a deemed taxable supply (even without consideration). Conversely, if the invoice to the customer clearly names the underlying supplier/principal, then the agent is likely acting as a disclosed agent (only one supply). Similarly, EU Implementing Reg 282/2011 Art.9a(1) allows a platform to avoid the “deemed supplier” presumption only if it explicitly indicates the actual provider as the supplier on documents and contracts. Thus, invoice naming and contractual clarity are crucial evidence of capacity. [bcajonline.org] [simmons-simmons.com], [simmons-simmons.com] [bcajonline.org], [simmons-simmons.com]
Does the intermediary have authority to change key terms or transfer title? If the intermediary sets or negotiates the price or other key terms with the customer, or if they take on risks (like stock risk, customer default risk) typically borne by a seller, it points to acting “as principal” toward the customer. The EU test is about whether the intermediary “appears as the supplier” from the customer’s perspective and has control/power in the transaction. For instance, in the CJEU “Auto Lease” case, a car leasing firm was found to be an undisclosed agent buying fuel for lessees because it set up a system of fuel cards and pre-approved prices – effectively controlling the supply of fuel. If instead the intermediary is clearly just arranging a deal and all substantive control remains with the actual supplier, it leans toward disclosed agency. [kpmg.com], [view.deloitte.nl] [kpmg.com], [kpmg.com] [view.deloitte.nl], [view.deloitte.nl]
Is there a formal commissionaire agreement? In civil-law countries, a “commission contract” explicitly establishes the intermediary is acting in own name for the account of the principal. If such an agreement exists (and the intermediary obtains legal title to goods momentarily, etc.), it’s treated as a commissionaire (two supplies) by default. Tax authorities may examine if all conditions for a commissionaire structure are met (e.g. transfer of ownership to intermediary, similar supplies, explicit on-behalf arrangement). If not, they might recharacterize the arrangement (as some did with fuel card cases) as a different supply (like a finance service). [vatupdate.com]

These criteria often require a holistic assessment. Tax authorities will look beyond contract labels if needed to see the economic reality. Reminder: Simply calling someone an “agent” or “commissionaire” in a contract is not decisive. Courts can and do recharacterize arrangements if the substance (e.g. who really bears the risk and deals with the customer) doesn’t match the form. A well-known example is CJEU Newey (Ocean Finance) 2013, where a loan broker’s scheme using an offshore “principal” was disregarded because the broker effectively acted as the supplier – demonstrating that abuse of law doctrine can override formal agency clauses. (See Section H and E for case details.) [pinsentmasons.com], [pinsentmasons.com] [bcajonline.org], [bcajonline.org]

Decision tree summary: If the intermediary is fully transparent as an agent, one supply by the principal (agent’s commission separate). If the intermediary acts in its own name (not transparent), two supplies are created (intermediary is deemed reseller). The exact categorization can vary by jurisdiction and fact pattern, but the above tests serve as a general guide. [marcusward.co], [kpmg.com] [kpmg.com], [simmons-simmons.com]

D. Global Landscape (VAT/GST Perspectives Worldwide)

D.1 EU Approach (Harmonized Framework):
The EU has a unified approach codified in the VAT Directive 2006/112/EC and its Implementing Regulation, as well as clarified by extensive CJEU case law. Key features:

Directive Provisions: Article 28 of the Directive embodies the undisclosed agency principle for services (and by extension, goods). Article 14(2)(c) covers goods explicitly, stating that a commission-based sale or purchase of goods is treated as a supply of goods (thus the commissionaire is deemed to receive and supply the goods). The upshot is that within the EU, any intermediary “acting in their own name” triggers a VAT fiction of two supplies regardless of what national civil law calls them. A disclosed agent arrangement, by contrast, involves just one supply (principal to customer) as per general principles, with the agent’s fee a separate taxable service. [kpmg.com] [kpmg.com], [kpmg.com] [marcusward.co]
Implementing Regulation 282/2011: This provides important guidance on applying the Directive. Article 9a (added in 2015) specifically targets electronic services platforms: it creates a presumption that online platforms (marketplaces, app stores, etc.) are acting in their own name (i.e. as undisclosed agents) for VAT when facilitating digital services to consumers – unless the platform explicitly shows the actual supplier as such in its interface and documentation. Article 9a was introduced to ensure uniform application of Article 28 in the digital economy, preventing Member States from diverging on whether, say, an app store is an agent or principal. The CJEU in Fenix (OnlyFans) confirmed that Article 9a is valid and essentially clarifies Article 28 without altering it. Additionally, the e-commerce VAT package (2021) added Article 14a to the Directive, extending a similar deeming principle to online marketplaces for goods (like Amazon/eBay facilitating certain sales), making them the deemed supplier for VAT on B2C imports and some intra-EU sales. In short, the EU has actively legislated to bring modern “platform” models into the undisclosed agent framework for consistent tax collection. [simmons-simmons.com], [simmons-simmons.com] [kpmg.com] [kpmg.com], [kpmg.com]
Neutrality Emphasis: EU law aims for neutrality so that VAT outcomes don’t depend on slight contract differences. As Henfling showed, if a commissionaire is selling exempt services (bets), that commissionaire’s turnover is exempt like the principal’s. Conversely, if an intermediary is not a commissionaire (e.g. just a broker), their fee might be taxable even if the underlying transaction is exempt. The distinction thus directly affects exemption and rate outcomes. VAT Directive Article 28 ensures that the VAT character (taxable/exempt, rate, place of supply) of the underlying supply carries through to the deemed supplies, avoiding mismatches. [vatupdate.com], [vatupdate.com] [vatupdate.com], [kpmg.com]
Common Interpretation Criteria: EU countries generally follow the CJEU’s guidance on how to identify undisclosed agency. Key factors include who the customer perceives as the seller, who sets terms, and how invoices are issued. The EU VAT Committee (an advisory body) has issued guidelines on specific scenarios, such as fuel card arrangements, to delineate when a chain of transactions is a true commissionaire chain or not. While not law, these guidelines (agreed nearly unanimously by Member States) indicate a strong consensus—for example, that if a fuel card issuer doesn’t actually take title or risk in the fuel, it’s not a commissionaire supply of fuel but rather a financing service. This underscores that substance prevails: to be an Article 28 commissionaire, the intermediary should have a form of title transfer or contractual role akin to a buy-sell, not merely act as a payment conduit. [kpmg.com], [kpmg.com]
UK (post-Brexit, but historically EU-aligned): The UK, having derived its VAT from EU law, retains similar rules in VATA 1994 Section 47 (mirroring Article 28) for supplies through agents acting in own name. Interestingly, the UK had to change its law around 2000 because under pure UK common law, an undisclosed agent did not create two supplies, causing cross-border VAT issues. Now, UK law compulsorily treats undisclosed agents as principals for VAT in almost all cases, especially cross-border, aligning with the EU approach. For wholly domestic scenarios, UK agents can opt to be treated as principals (to simplify accounting) but it’s not mandated. Post-Brexit, the UK also adopted “marketplace as deemed supplier” rules for digital services and online sales, functionally similar to the EU’s approach (even if not word-for-word implementing Art.9a). The HMRC manuals explicitly acknowledge the difference between UK common law (agent doesn’t alter supply) and civil law (commissionaire does), and instruct that VAT should follow the commissionaire model for undisclosed agents to prevent distortions. [gov.uk] [gov.uk], [gov.uk]

D.2 Comparative Notes from Non-EU VAT/GST Countries:
Different jurisdictions have developed their own rules and terminology, though international guidelines (like the OECD’s) aim for convergence in principle. Here are highlights from selected systems:

Australia (GST): Australian GST law explicitly addresses agents. Under the A New Tax System (Goods and Services Tax) Act 1999, an entity can make supplies or acquisitions through an agent without the principal needing to register in some cases, but the agent and principal may agree who issues the tax invoice. GST Ruling 2000/37 clarifies that if an agent acts in the name of the principal, the principal is the supplier; if acting in own name, the agent might be treated as making a supply to the customer and a corresponding supply from principal to agent. Australia allows agents and principals to agree to treat certain taxable supplies as being made by the agent (to simplify compliance). Notably, Australian practice aligns with the general concept: if an intermediary acts as if they are the seller, the tax will be accounted for as if they bought and resold (there are specific provisions for this, including for import/export scenarios). Invoicing and GST reporting can thus shift to the intermediary by law.
Singapore (GST): Singapore’s GST Act is modeled on the UK VAT Act and therefore closely follows the disclosed vs undisclosed agent concepts. Guidance from IRAS (Inland Revenue Authority of Singapore) indicates that if a local agent acts in its own name for a foreign principal, it may be regarded as the supplier for GST (this affects whether the foreign company needs to register). Singapore’s e-Tax Guide on GST also uses the term “section 33 agent” for import scenarios, which is different (referring to a fiscal representative), but for commercial transactions, the same logic of “supplier includes an agent acting on behalf” applies. In summary, Singapore treats undisclosed agents similarly to the EU/UK – the GST-registered agent would charge GST on sales and can recover GST on purchases made for the principal, rather than treating the principal as making the supply. This is consistent with neutrality and practical tax collection since Singapore’s GST is also destination-based.
Gulf Cooperation Council (e.g. UAE, KSA): GCC countries’ VAT frameworks (implemented around 2018) differentiate disclosed vs undisclosed agents. For example, the UAE VAT law (Federal Decree-Law No. 8 of 2017) originally mirrored international practice: a “disclosed agent” facilitates without being deemed supplier, whereas an “undisclosed agent” is treated as buying/selling on own account. Recent amendments in the UAE (2023) introduced an interesting rule: if a foreign principal appoints a UAE agent who regularly negotiates and concludes contracts or maintains stock for the principal, the principal may be deemed resident in the UAE for VAT purposes. In effect, the UAE is using the agent’s activities to determine place-of-supply/residence, somewhat analogous to permanent establishment concepts. Practically, this means a foreign company using a dependent agent in UAE could be required to register for VAT because it’s considered to have a residence via the agent. Aside from that, standard UAE practice (as explained in guides) is: disclosed agent – principal issues the VAT invoice; undisclosed agent – agent issues the VAT invoice and is treated as supplier. Other GCC states (Saudi Arabia, Bahrain, etc.) have similar provisions given the GCC VAT Agreement baseline, though specifics can vary. [grantthornton.ae] [tax.lynchp…ulting.com] [grantthornton.ae], [grantthornton.ae]
India (GST): India’s GST distinctly defines “agent” in Section 2(5) of CGST Act as someone who carries on business of supply/receipt of goods or services on behalf of another. Under Schedule I of the Act, a transfer of goods between a principal and agent is a deemed supply (taxable) if the agent will supply those goods further in their own name. A 2018 CBIC Circular clarified that the crucial test is invoice issuance: if the agent issues the invoice to the customer in the agent’s name, it triggers the deemed supply (principal to agent). If the agent issues all invoices in the principal’s name (even if physically handling goods), then it’s not treated as two supplies. Thus, India’s GST closely mirrors EU logic for goods – effectively embedding the commissionaire concept into domestic law. For services, India historically had an “intermediary services” concept: an intermediary (brokering a supply) was not considered to be supplying those services on their own account, and special place-of-supply rules applied (which until 2023 often made such B2B intermediary services taxable in India even when the customer was abroad, a contentious issue). However, when an Indian entity is not merely arranging but also undisclosed or acting as importer on record, the GST law might treat it as the principal (for instance, an Indian importer who resells goods as a “buyer on record” must pay IGST on import and charge GST on domestic supply, rather than treating the overseas principal as the importer). Overall, India recognizes and taxes principal-agent transfers to avoid revenue leakage, with an emphasis on document-based tests to determine capacity. [bcajonline.org]
China and East Asia: In China’s VAT system, the concept of “commission agency” exists, especially in import/export. For domestic transactions, if an entity acts as an agent selling goods, typically the principal is considered the seller for VAT and the agent’s fee is a service (unless the agent does a buy-resell) – broadly akin to disclosed vs undisclosed. China’s VAT rules (and guidance) often refer to “acting as an agent” versus trading in one’s own name; a notable example is that an export agent can facilitate a zero-rated export on behalf of a manufacturer without taking ownership. However, if the intermediary invoices the buyer themselves and then pays the manufacturer, Chinese tax authorities may regard it as a separate domestic sale to the intermediary and an export by the intermediary. The details in China can be complex and depend on SAFE (foreign exchange) rules and invoice issuance rules (the “fapiao” system). Other East Asian jurisdictions (Japan, South Korea) have similar underlying concepts but may not have the extensive case law; they rely on commercial law principles to distinguish when a party is selling as principal.
Latin America: Many Latin American countries have VAT but often less explicit legislation on commissionaire vs agency, relying on general civil and commercial law. Brazil, for instance, has a complex indirect tax structure (federal VAT on services, state VAT on goods “ICMS”). Brazil’s Civil Code provides for “mercantile agents” (agentes, representantes comerciais) and “commission contracts” (“contrato de comissão”), with differences in legal effects. For ICMS (goods VAT), a commissionaire (comissário) who sells goods in own name on behalf of a foreign principal might trigger an import ICMS at the commissionaire’s end followed by a domestic supply. Brazilian authorities tend to ensure the commissionaire is registered and accounts for tax on their sale, treating them effectively as the importer/supplier. Many LATAM countries also have adopted digital marketplace rules: e.g. Chile and Colombia require digital platforms to withhold or charge VAT on supplies by foreign providers, effectively treating them as the taxpayer for enforcement (not exactly the same as Article 28, but similarly aiming to pin tax responsibility on the intermediary).

In summary, while terminology and legal mechanics differ, the global trend aligns with the principle that when an intermediary acts as the face of the transaction, they bear VAT responsibilities. The OECD International VAT/GST Guidelines underscore neutrality and recommend that tax rules clearly identify the supplier in intermediary situations to avoid gaps. Many countries follow the EU’s lead, especially for digital economy transactions, by introducing “deemed supplier” rules (e.g. EU’s Article 9a, UK’s “marketplace rules”, Australia’s rules for online platforms, etc.). However, local nuances (like UAE’s use of agent’s presence to create local tax residence, or India’s invoice test) mean businesses must check each jurisdiction’s specific rules in cross-border agency setups. [kpmg.com], [simmons-simmons.com] [simmons-simmons.com], [simmons-simmons.com]

E. ECJ/CJEU Case Law (Key Cases) – Facts, Issue, Holding, Takeaway:

To illustrate the concepts, here are seminal CJEU cases (and one UK/EU linked case) dealing with agency vs commissionaire in VAT, with their core points:

Case 1: Auto Lease Holland BV (C‑185/01, 2003) – Fuel Cards and Commissionaire vs. Facilitator
• Facts: Auto Lease Holland, a car leasing company in NL, provided fuel cards to lessees enabling them to buy fuel from petrol stations. Auto Lease reimbursed the petrol companies and charged the lessee as part of lease fees. It reclaimed VAT on the fuel from Germany (where fuel was bought) and considered itself reselling fuel to customers. German authorities questioned this, since Auto Lease never physically took fuel or delivered it.
• Legal Issue: Was Auto Lease acting as a commissionaire buying and reselling fuel (thus entitled to recover VAT on fuel purchases), or merely arranging payment for the customers’ own fuel purchases (in which case it wasn’t the supplier)?
• Holding: Auto Lease was deemed to be a commissionaire buying and supplying the fuel for VAT purposes. The Court found that contractually Auto Lease placed itself between the petrol sellers and the customers, paying the fuel supplier and then billing the customer. Even though the drivers pumped the fuel, Auto Lease’s intervention and bearing of payment risk meant it “took part in the supply in its own name”. Article 6(4) of the Sixth Directive (now Art.28) applied, creating two supplies and allowing Auto Lease’s VAT refund claim.
• Practical Takeaway: The CJEU signaled that intermediaries in chain transactions can be treated as principals if they interpose themselves contractually and financially. Even without ever touching the goods (fuel), one can be the deemed supplier if one controls billing and assumes obligations. This case has guided VAT treatment of fuel cards and similar arrangements: VAT authorities now examine whether an fuel card issuer is a true reseller (commissionaire) or just extending credit. Later cases (e.g. Vega International 2019) refined this, but the principle stands: substance and contractual role trump the lack of physical delivery. Here, neutrality was preserved by treating Auto Lease as if it bought fuel, ensuring VAT on fuel was recoverable by the “reseller” rather than locked as an expense of the final consumer. [view.deloitte.nl], [view.deloitte.nl] [view.deloitte.nl]
Case 2: Henfling (C‑464/10, 2011) – Betting agency, exemption & undisclosed agent
• Facts: Mr. Henfling operated as a “buraliste” (betting shop agent) for a licensed Belgian betting company (TFB). He sold bets to punters in his shop in his own name, but on behalf of TFB, under a commission contract. Betting stakes were exempt from VAT under EU law. Henfling retained a commission (a percentage of stakes) and didn’t charge VAT on it. Tax authorities argued he provided a taxable service to TFB (since he acted in own name) and assessed VAT on his commissions.
• Legal Issue: Does VAT exemption for betting extend through a commissionaire chain? In other words, when a commission agent acts in own name to accept bets for an exempt principal, are the agent’s services exempt as part of the betting supply (applying Art.6(4) of Sixth Directive, now Art.28), or are they a separate taxable supply of services to the principal?
• Holding: The CJEU ruled that the betting transactions remained exempt through the commissionaire. Applying the commissionaire fiction (Art.6(4) 6th Dir.), the principal (TFB) is deemed to supply an exempt betting service to the agent, who in turn supplies an exempt betting service to gamblers. Thus, the agent’s commission was not a separate taxable service but part of the exempt supply chain. The Court explicitly said an operator acting in own name on behalf of an exempt betting company “is to be considered, in accordance with Article 6(4), to provide that operator with a supply [of betting services] coming under that exemption.” • Practical Takeaway: This case demonstrates that Article 28 applies even when the underlying supply is exempt, and it ensures the exemption (or particular VAT treatment) flows through to the intermediary’s deemed supply. It clarified that an undisclosed agent doesn’t create a new taxable service in addition – instead, there are two supplies of the same nature (bets) in a chain. For businesses, if you operate as an undisclosed intermediary in an exempt sector (gaming, insurance, financial services), your commission might inherit the exempt status (good for competitiveness), but only if you truly fall under the “acting in own name” rule. If you were merely a disclosed broker, your commission would be taxable (since it’d be a separate supply of intermediary service). Henfling also highlighted the need for alignment: Belgium’s VAT code already deemed undisclosed agents as principals, which the court upheld, preventing the tax authority from taxing the commission separately. [vatupdate.com], [vatupdate.com] [vatupdate.com]
Case 3: Newey (Ocean Finance) (C‑653/11, 2013) – Substance over form: artificially routed supplies
• Facts: A UK loan broker, Mr. Newey (trading as Ocean Finance), supplied loan brokerage (which is VAT-exempt as a financial service in the UK). He set up an arrangement where a Jersey-based company (Alabaster) formally acted as principal, with Newey described as Alabaster’s agent providing advertising services. In reality, Newey’s UK business did all the advertising and dealing with customers, but contracts with ad suppliers were made in Alabaster’s name. The result: advertising (a taxable service) was billed to Jersey (outside scope of VAT) and loan brokerage, being exempt, generated no VAT – thus avoiding UK VAT on ad costs. HMRC saw this as an artificial scheme to avoid irrecoverable VAT on advertising.
• Legal Issue: Should the formal agency and contract structure be respected for VAT (with Jersey co. as principal), or can HMRC ignore the contractual arrangement because it doesn’t reflect economic reality (thus treating Newey as the true service provider and recipient of the advertising)?. Essentially, it was a test of the EU abuse of law doctrine in VAT – whether the principal/agent split could be recharacterized.
• Holding: The CJEU held that tax authorities and courts must look at economic and commercial reality over contractual form if the latter is wholly artificial and aimed solely at tax avoidance. It ruled that if it appears that Mr. Newey was in reality the supplier of loan-broking to customers (and the recipient of advertising services), the UK court can set aside the interposed Jersey entity. The case was referred back for factual determination, but the principle was clear: contractual designation of a party as “agent” or “principal” can be ignored if it does not reflect actual functions and risks. • Practical Takeaway: Newey is a caution that misusing agent-principal arrangements purely for VAT advantage may be deemed abusive. Simply moving paper contracts offshore while business operations remain onshore won’t fool authorities. To legitimately have an offshore principal with a local agent, the substance must match – the principal needs to genuinely direct the supplies and bear risk/reward. For tax directors, this case underscores the importance of aligning contracts with operational reality: inconsistent behavior (e.g. agent controlling everything while contract says otherwise) can lead to recharacterization and back-dated VAT liabilities. In sum, while Article 28 can create legal fictions, those fictions cannot be used abusively to avoid VAT; anti-abuse principles serve as a check against manipulating the rules in form only. [pinsentmasons.com], [pinsentmasons.com] [pinsentmasons.com]
Case 4: Fenix (OnlyFans) (C‑695/20, decided 28 Feb 2023) – Platforms as deemed suppliers; validity of Reg 282/2011 Art.9a
• Facts: Fenix International operated “OnlyFans,” an online platform where content creators (sellers) provide digital content to subscribers (buyers). OnlyFans retained 20% of payments as its fee. Fenix was charging UK VAT only on its 20% commission, treating itself as an agent of the creators for VAT. HMRC argued that under EU Implementing Reg 282/2011 Art.9a, effective 2015, Fenix should be deemed to supply the full service (thus owing VAT on 100% of amounts from fans). Fenix challenged Art.9a’s validity, claiming it went beyond the VAT Directive (Article 28) because it could deem a platform a supplier even if the actual supplier is disclosed (OnlyFans creators were arguably known to fans).
• Legal Issue: Was Article 9a of Reg 282/2011 (which presumes certain intermediaries in e-services act in own name) valid? Does it unlawfully broaden Article 28 by catching even some disclosed agency situations?. Essentially, could the Council via an implementing regulation impose this deeming rule on platforms?
• Holding: The CJEU upheld Article 9a as valid and within the scope of Article 28. It reasoned that Art.9a was introduced to ensure uniform application of Article 28 in digital markets and to prevent avoidance of VAT on B2C e-services after the 2015 place-of-supply change. It does not change the core of Article 28, but clarifies it by giving objective criteria when a platform is presumed to be acting in its own name. Those criteria (e.g. platform authorizes charge to customer, sets terms) align with identifying who controls the supply. The Court noted that Art.9a still allows rebuttal if the platform clearly shows the actual provider as the supplier and reflects this in contracts. Fenix, having not done so, fell under the presumption. Thus, OnlyFans must account for VAT on all customer payments, not just its commission.
• Practical Takeaway: This landmark confirms that digital platforms are often treated as undisclosed agents (deemed suppliers) by law. It solidified the idea that even if users know the underlying seller’s identity, a platform can still be on the hook for VAT if it orchestrates key elements of the supply. For businesses operating marketplaces or apps: if you fall within such criteria (control pricing, delivery, terms, or transaction flow), you likely bear full VAT liability on sales facilitated. Also, attempts to claim “but we show the seller’s name somewhere” won’t work if the overall impression is that the platform is the supplier. After Fenix, both the EU and UK have clear mandates: platforms must collect and remit VAT on many B2C digital transactions. It’s a nudge for companies to update their VAT processes, possibly their contracts (to explicitly shift supplier status if desired, though practically limited by law), and their pricing (platforms now must charge VAT where previously they might not have). [simmons-simmons.com] [simmons-simmons.com], [simmons-simmons.com] [kpmg.com], [kpmg.com]
Case 5: X (App Store Commissionaire) (C‑101/24, CJEU judgment Oct 2025) – Retroactive application of Article 28 to marketplaces pre-2015
• Facts: (Based on the CJEU press release and KPMG summary) A German app developer sold apps via an Irish-run app marketplace (an “App Store”) before 2015. The App Store handled in-app purchase billing, initially treating the developer as seller (charging German VAT). Later, the developer argued the App Store should have been deemed the supplier (so the sale was in Ireland, not subject to German VAT). Germany’s tax authority maintained that, prior to the explicit Art.9a rule (pre-2015), the platform was just an intermediary and the developer was the supplier.
• Legal Issue: In the pre-2015 period (before Reg 282/2011 Art.9a), could Article 28 itself apply to make the App Store a deemed supplier? Specifically, if the App Store didn’t clearly disclose the developer as the supplier to customers at purchase, does Article 28 deem the platform as buying/reselling?. Also, if yes, what was the correct place of supply for the developer→platform leg? (Article 44 vs 45 rules).
• Holding: The CJEU (in X 2025) applied Article 28 directly to the scenario, even pre-2015. It affirmed that a platform which “appears to the customer as the seller” and acts in its own name must be treated as an undisclosed agent under Article 28. The Court noted that the introduction of Art.9a in 2015 clarified but did not change this principle, so it can be applied retroactively. In this case, because the App Store’s interface made the average user think the store was the seller (users had to accept the store’s terms, etc., and the developer’s identity was not obvious until an order confirmation), the platform was an undisclosed agent. Thus, the app supply was from developer to platform (Ireland) and platform to consumers. The place of the first (B2B) supply was where the platform was (Ireland, per Art.44), and the second (B2C) supply was (under then rules) where the supplier was (Ireland) – meaning Germany couldn’t VAT the sales. The CJEU also ruled that a later-issued invoice naming the developer with German VAT didn’t override the initial characterization, and that Article 203 (VAT on invoices) didn’t penalize the developer for that since no one was deducting that VAT (no risk of fraud).
• Practical Takeaway: This case confirms that lack of explicit rules before did not mean platforms were off the hook – Article 28’s broad language was sufficient to capture them if facts indicated own-name participation. It also reinforced the importance of how transactions are presented to customers: clear disclosure of the actual supplier at the moment of sale could have changed the outcome. For businesses, this emphasizes consistency: if you want to be a pure agent, the user experience and documentation must reflect that (e.g. “Sold by [Third-Party Seller]”) – otherwise, tax authorities (and courts) will treat you as the seller. Additionally, X settled that even without Implementing Regulation guidance, the underlying directive can be interpreted dynamically to new models. For tax planning, one can’t assume “if the specific rule wasn’t in force, we’re safe” – general principles like Article 28 can be applied by analogy. [kpmg.com], [kpmg.com] [kpmg.com]
Case 6: Digital Charging Solutions (DCS) (C‑60/23, 2024) – EV charging networks, commissionaire deemed for goods
• Facts: DCS, based in Germany, operated an e-mobility service: it contracted with electric vehicle charging point operators across the EU and provided EV drivers (users in Sweden, etc.) access via a single app/card. Drivers paid DCS for charging sessions; DCS paid the local charge-point operators (CPOs) monthly. The question was whether DCS was buying and reselling electricity (a good in VAT terms) to the drivers – a chain transaction – or merely providing a service (network access/ billing service) with the CPO as the one supplying electricity to the driver. Taxably, if DCS was a commissionaire for goods, it would have two supplies of electricity (CPO->DCS, DCS->driver), each potentially in different countries (with DCS’s supply treated as domestic in the driver’s country under special place rules for energy). DCS argued it only provided a composite service. • Legal Issue: Is an EV charging intermediary like DCS a commissionaire for goods (electricity) under Article 14(2)(c) of the VAT Directive, thus deemed to buy/sell the electricity? And how to distinguish from previous fuel card cases where intermediaries were not considered resuppliers?. • Holding: The CJEU concluded that DCS does buy and sell the electricity as a commissionaire. It noted that unlike pure fuel card issuers (who sometimes were deemed mere financiers, e.g. in Vega Intl.), DCS had contracts on both sides and was integral in delivering the power to the end user, appearing as the supplier of charging to the customer. The Court emphasized that under the commissionaire fiction, the intermediary is deemed to receive and transfer title to the goods (electricity) without needing actual physical control. It found the conditions for commissionaire met: DCS acted in its own name vis-à-vis drivers, and had an agreement with CPOs to procure the supply on behalf of drivers. Minor differences from earlier card models (like DCS invoicing per transaction, assuming some consumption risk) tipped it to commissionaire treatment. The ECJ thereby treated EV charging sessions as two consecutive supplies of electricity. (It left to national court whether DCS’s separate service fee was ancillary or separate, but indicated if it’s a single bundled supply, it takes the VAT nature of the principal supply (electricity).) • Practical Takeaway: The DCS case is a modern application of commissionaire principles to the energy/tech sector. It clarifies that intangibles like electricity (or likely any goods delivered via a network) can have commissionaire chains. It also shows the EU’s intent to align treatment in new industries: the VAT Committee had earlier advised that a typical EV charging model should be treated as successive supplies (CPO->e-mobility provider->consumer), and the Court confirmed this. Businesses in similar multi-party models (fuel cards, virtual goods, etc.) should carefully structure contracts: if they want to avoid being a deemed reseller, they must ensure they do not act in their own name. If they do act as principal (even only legally), they must comply with the VAT obligations in each leg (potential multiple registrations, local VAT on each sale). From a risk perspective, DCS also highlights that the line between a taxable service vs two supplies of goods can be fine – companies need to evaluate how tax authorities view their role. For EV charging and similar, the decision likely forces intermediaries to treat themselves as sellers of the commodity, affecting their VAT registration and reporting in every country where charging occurs. [view.deloitte.nl], [view.deloitte.nl] [view.deloitte.nl]

(Table above summarized from CJEU judgments: Auto Lease Holland, Henfling, Newey, Fenix, X (App Store), Digital Charging Solutions.) [view.deloitte.nl], [view.deloitte.nl] [vatupdate.com], [vatupdate.com] [pinsentmasons.com], [pinsentmasons.com] [kpmg.com], [kpmg.com]

F. Selected Country Practices (6–10 Jurisdictions Comparison):
Every country may interpret and implement the agent/commissionaire concept a bit differently. Below we compare the practical treatment, typical risk triggers, evidence required, and assign a risk rating for misclassification (Low/Med/High) in each jurisdiction.

(Note: “Risk rating” here reflects how likely mis-characterizing a relationship could lead to VAT non-compliance or disputes in that country, given the local rules.)

Germany (DE):
• Authority approach: Germany follows the EU Directive strictly. The UStG (§3(11)) includes the commissionaire rule: if an entrepreneur acts in his own name on behalf of another, a supply is deemed to occur to and by him (separately for goods “Lieferkommission” and services “Dienstleistungskommission”). German VAT guidance (UStAE) elaborates that no actual transfer of physical disposal is needed under a commission contract – legal title suffices. Thus, disclosed agents (Handelsvertreter) are not taxed on the main supply, only on their commission, whereas commissionaires (Kommissionäre) face two-taxable-supply treatment.
• Triggers: Lack of clear disclosure of principal on invoices or contracts will trigger assuming a commissionaire structure. If a German intermediary issues its own invoice to a customer, tax authorities expect that intermediary to charge VAT on the full amount, treating it as a sale. Also, if an intermediary adjusts pricing or has inventory risk (even minimal), authorities lean to classify as commissionaire.
• Evidence expected: German tax offices look for formal commission agreements or clauses (“in eigenem Namen für fremde Rechnung”) as evidence of commissionaire. They also examine VAT invoice details: if the invoice is in the intermediary’s name, that’s strong evidence of a commissionaire relation. Conversely, if all customer invoices name the principal and the agent clearly identifies as “Vermittler” on documents, that supports disclosed agency.
• Risk rating: Medium-High. German authorities are diligent in auditing cross-border commissionaire arrangements (due to potential trade with non-EU principals) – misclassifying can lead to denied input VAT or unexpected VAT liabilities. However, German law is also detailed, so well-documented structures can achieve certainty. The risk is higher if one tries to claim an intermediary fee is a VAT-free reimbursement or similar without proper structure – likely to be challenged. [gov.uk], [gov.uk]
United Kingdom (UK):
• Authority approach: The UK, post-2016, retains EU-like rules in VATA 1994. Section 47 mirrors Article 28: an undisclosed agent is treated for VAT as a principal (compulsory for international supplies; optional for domestic). Historically, UK common law’s stance (no fiction of two supplies) was overridden by this provision in 2000 to align with EU practice. HMRC’s manuals list six indicators to distinguish agent vs principal (e.g. who bears risk, who alters the product, etc.). If those point to principal-like behavior, HMRC will treat the “agent” as the supplier.
• Triggers: Key triggers for HMRC are contracts that omit the principal’s name on customer-facing documents and situations where the “agent” sets the price or alters terms. Also, if the supposed agent bundles its fee into the sale price rather than separately invoicing the principal, that hints at undisclosed agency. Recent HMRC guidance for digital platforms automatically deems many to be acting as principal for VAT on sales they facilitate (similar to EU rules).
• Evidence expected: HMRC expects to see agency agreements stating whether the agent can bind the principal, and how invoicing is done. VAT Notice 700 (The VAT Guide) and internal manuals emphasize documentation: e.g., agents should disclose principals on invoices to treat the sale as the principal’s. They also consider commercial reality: HMRC is empowered (backed by case law like Newey) to look beyond written terms if they suspect those terms are a façade. So evidence includes not just contracts but marketing material, website terms, etc. showing who is presented as seller.
• Risk rating: High. The UK actively audits agent/principal issues because they affect output tax and input tax recovery significantly. Sectors like travel, ticketing, and voucher intermediaries have had multiple disputes (e.g. Med Hotels/Secret Hotels2, Adecco, AirBNB issues) on this point. Given HMRC’s focus and willingness to litigate substance-over-form, misjudging one’s role can lead to back taxes and penalties. On the other hand, where properly structured, one can achieve desired VAT outcomes (e.g. an agent arrangement to avoid needing an overseas registration), but ongoing compliance (invoicing correctly, etc.) is crucial to sustain that position. [gov.uk], [gov.uk] [marcusward.co], [marcusward.co] [simmons-simmons.com], [simmons-simmons.com] [pinsentmasons.com], [pinsentmasons.com] [gov.uk], [simmons-simmons.com]
France (FR):
• Authority approach: France’s Code Général des Impôts (CGI) incorporates the commissionaire concept deeply, as it’s rooted in French commercial law. A commissionnaire who buys or sells in own name for a principal is considered to make an onward taxable supply. The French VAT Code treats “ventes à commission” as taxable supplies by the commissionnaire. France is known for using commissionnaire arrangements to allow foreign companies to operate without a fixed establishment (though that has direct tax implications – see “Zimmer PE” case) – but for VAT, the commissionnaire is the local taxpayer. Mandataires (true agents) in contrast do not figure in the supply chain for TVA. • Triggers: French tax authorities scrutinize whether the intermediary is disclosed: a mandataire transparent (disclosed agent) must meet conditions like issuing invoices in the principal’s name and not altering terms. If not, the intermediary is defaulted to commissionnaire status. Frequent triggers of risk: foreign firms treating a French entity as a mere agent while that entity actually contracts with customers. If invoices show the French entity’s SIRET/TVA number as seller, the VAT will be due from that entity regardless of internal arrangements. • Evidence expected: The French tax office (DGFiP) will look at contracts (is it titled contrat de commission or contrat d’agence?), invoice headers, and whether the intermediary bore any costs like warranty or delivery – if yes, likely a commissionnaire. They also examine if the principal’s name appears anywhere in customer communications. Under French law, a commissionnaire acting in its own name shields the principal from the customer; if customers can identify or claim against the principal directly, it hints at an agency. So evidence such as customer service processes, T&Cs of sale, etc., are relevant. • Risk rating: Medium. France generally follows established doctrine – there’s less ambiguity in definitions thanks to the civil code. If you follow form (choose either mandat or commission clearly and perform accordingly), VAT treatment is predictable. However, one risk area is international services: a French company might think it’s just an agent of a foreign provider and not charge TVA, but if it didn’t meet the strict criteria, authorities might requalify it and assess TVA on the full service amount (with potential penalties). Also, the interplay with permanent establishment (PE) in corporate tax is a risk: using a commissionnaire avoids, in theory, the foreign principal having a VAT registration, but BEPS changes mean that same arrangement could trigger a corporate PE. Thus, misalignment can create controversies (though that’s legal risk beyond VAT). Overall, as long as documentation is in order, France is consistent; but if authorities suspect an artificial setup to avoid French VAT, they will probe. [gov.uk] [gov.uk], [gov.uk]
Netherlands (NL):
• Authority approach: The Dutch VAT law and practice also align with EU rules: an “commissionair” who acts in own name is deemed to trade the goods/services (per Dutch VAT Act, which implements Art.28). The Netherlands historically has had cases (e.g. Amsterdam Board of Underwriters in the 90s) on agency vs principal. Dutch Tax Authority (Belastingdienst) is generally pragmatic: it issues guidance, for instance, to travel agents, explaining when they are agents (falling under special TOMS scheme or not). • Triggers: A notable emphasis in NL is on invoice and contract wording (similar to others). Also, the Dutch often use examples: e.g., if you call yourself “independent broker” but you issue invoices in your own name, you’re actually a supplier. The VAT Entrepreneurs’ Guide indicates that if an intermediary “acts in its own name” it must treat itself as supplier. A specific Dutch twist: the “ABC transaction” simplification – where B acts in own name between A and C – is recognized; B can sometimes avoid double VAT by using triangular simplification in EU trade if conditions meet, but if not, B has to register in the country of C as needed. • Evidence: Dutch auditors expect to see whether BTW (VAT) on the transaction was accounted by whom. If a Dutch party did not charge BTW to a customer claiming to be agent, the auditor will ask for proof that the foreign principal accounted for it. Absence of such proof could lead them to say the Dutch party should have charged it (so it was actually principal). The existence of direct agreements between principal and customer behind the intermediary’s back would signal the intermediary was just an agent. The Netherlands is also known for a particular case (DACSI 2015) about call-off stock: if an intermediary had power to call off stock, did that make them owner? It was ruled no in that case (distinct context), but it shows the nuance in determining power of disposal. • Risk rating: Medium. The Netherlands is considered a taxpayer-friendly jurisdiction with clear rules. If you misapply agent/principal, the cost is usually just the VAT plus interest – penalties might be lighter if it’s seen as a technical mistake. However, the risk can be High for sectors like employment services (ref. Widex and X BV cases on whether a temp agency acts as agent or principal – getting it wrong can mean a 21% VAT surprise on all supplies). Dutch courts often follow EU jurisprudence closely. A business that clearly documents agency (and ensures principal is VAT registered where needed) can manage risk well. But playing the system (e.g. claiming to be an agent to zero-rate a supply when in fact acting independently) will be caught by Dutch authorities especially since EU-wide data sharing (via VAT returns, OSS, etc.) makes inconsistencies visible.
Belgium (BE):
• Authority approach: Belgium’s VAT Code (TVA/BTW) expressly recognizes commissionaires (“commissionnaires”) and agents (“mandataires”). Belgian rulings and jurisprudence (as in Henfling) treat commissionnaires as principals for VAT. The Belgian VAT authorities often refer to “commissionaire arrangements” in administrative rulings, e.g., consignment stock or subcontracting. Notably, Belgium historically had quirks: before 2015, an undisclosed intermediary in cross-border services faced the same issue as UK – which they solved by administrative tolerance or requiring a specific article of VAT Code to apply. Now, Belgium follows the standard: undisclosed agent = two supplies. • Triggers: If a Belgian entity claims input VAT on something and says “it was bought for my principal,” the tax office will scrutinize if Article 28 was triggered (meaning the Belgian actually is deemed buyer, so input VAT okay). Conversely, if a Belgian doesn’t charge VAT on output because “it was my principal’s sale,” they’ll verify if the Belgian truly acted in name of principal (disclosed). Common triggers: Intercompany distribution – e.g., a Belgian subsidiary selling in its own name goods that legally belong to a foreign HQ and only remitting a commission. If not structured properly, VAT officials may see two supplies (import by BE sub then local sale) rather than just a commission. • Evidence: Belgium expects formal agreements called “Contrat de commission” or “Contrat d’agence.” They also rely on accounting evidence: commissionaires record the sales in their accounts (with a purchase and sale), whereas agents might only record a commission fee. The VAT audit may request general ledger accounts to see how transactions were booked. Invoices: if a Belgian invoice doesn’t mention “for account of X” or lacks the principal’s VAT number where needed, that’s evidence the Belgian was the supplier. • Risk rating: Medium. Belgian VAT auditors are experienced with complex arrangements (Brussels is home to many EU and multinational orgs). They respect clear documentation but will penalize sloppy or false arrangements. The Henfling saga showed that if law supports the commissionaire approach, it will be applied to the taxpayer’s benefit (exempting his commission). So risk cuts both ways: if you erroneously treat yourself as agent but you were commissionaire, you owe VAT; if you erroneously overpaid VAT on commissions that should’ve been part of an exempt supply, you might reclaim (but that’s rarer). Given Belgium’s alignment with EU principles and a cooperative ruling culture, one can mitigate risk by seeking an Advance Decision (ruling) on complicated models. [vatupdate.com], [vatupdate.com]

(For brevity, additional jurisdictions in this comparison follow the trends above: e.g. Italy and Spain implement Article 28 in their VAT laws; they generally treat commissionari/commissionistas the same as the EU rule, with local interpretations mostly in line. Both have “MOSS/OSS” adoption for digital which follows the agent deeming rules. Switzerland, while not in the EU, has similar concepts in its MWSTG: an undisclosed agent (“Stellvertreter ohne Offenlegung”) is taxed as if two supplies occurred, and Swiss rules even allow simplification for domestic vs. foreign principal scenarios, requiring a fiscal rep if a foreign principal sells with a Swiss disclosed agent. Norway (in EEA) follows EU VAT directive logic and likely implements the distinction similarly – Norwegian VAT law §3-1 et seq. define when an agent is not considered the seller (they also have special rules for travel agents). United Arab Emirates and Saudi Arabia have guidance clarifying disclosed vs undisclosed with examples (UAE’s Public Clarification VATP0040, for instance); they put high importance on invoicing and contract wording. Singapore and Australia we touched upon – both allow agents to act for foreign principals but require explicit disclosure to avoid local tax triggers; Australia’s GST Sec.153-50 even allows agreements to treat agent supplies as principal in some cases, to simplify credits. India we discussed – very rule-bound (Schedule I, etc.), thus high risk if mischaracterized due to potential GST and penalty as well as recent law changes that remove the export benefit if mis-classified as intermediary. Brazil is complex: if mischaracterized, one might miss collecting state ICMS leading to heavy fines. But due to space, we omit full details.)

G. Why This Matters for Businesses – Operational Implications
Misjudging whether you (or your counterparty) is an agent or principal can have significant operational and financial impacts:

VAT Registration and Reporting: The determination of “who is making the supply” dictates who must register for VAT in each jurisdiction. For example, if your company uses a local commissionaire to sell in Country X, your company might avoid registering in X (the commissionaire is the deemed supplier) – but the commissionaire must register and comply in X. Conversely, if you use a disclosed agent in X, you as the principal may need a VAT registration there to report the sales and remit VAT. This is crucial in global expansions: many digital platforms initially acted as “agents” to not have to register in every consumer’s country, until laws changed to force their registration (by deeming them suppliers). Place of supply rules are also affected – in the X (App Store) case, treating the platform as supplier shifted the place of supply from Germany to Ireland, nullifying German VAT. Operationally, finance teams must know where to accrue VAT. The use of One-Stop-Shop (OSS) in the EU for B2C sales, for instance, might depend on whether the sale is yours or via a platform (if the platform is deemed supplier, they might do OSS). Thus clarity on roles directly informs tax compliance strategy and systems configuration for VAT reporting across countries. [gov.uk], [tax.lynchp…ulting.com] [gov.uk] [marcusward.co], [gov.uk] [kpmg.com], [kpmg.com]
Invoicing and Documentation: The agent/principal status determines whose name and VAT number appears on invoices and what VAT is charged. This is not just a formality – many jurisdictions (especially with e-invoicing mandates) require that the actual supplier’s details be on the invoice for it to be valid for input VAT recovery. If you mistakenly issue invoices as “AgentCo on behalf of PrincipalCo” when in fact AgentCo is the deemed supplier, you could confuse customers and risk their VAT deductions being denied by tax authorities (since the entity charging VAT wasn’t shown as seller). With real-time reporting and e-Invoicing (like Italy’s SDI, France’s upcoming e-invoicing, or global Peppol networks), consistency is crucial: the system needs to know who the supplier is for each transaction to populate the invoice data and clearance reports correctly. A mismatch (e.g. reporting yourself as “intermediary” but sending invoices as principal) can flag audits. Also, self-billing or commission statements: in disclosed agency, principals often self-bill the agent’s commission or require special documentation; these flows need to be built into accounts payable/receivable processes. [bcajonline.org], [simmons-simmons.com] [bcajonline.org]
Cash Flow and Financial Exposure: Acting as principal (even if only deemed) means you collect output VAT on the full sale and may have to pre-finance that VAT until reclaim, if any. For instance, an undisclosed agent selling at 20% VAT and taking a 10% commission will collect 20% VAT on the full amount, remit that to the government, and claim back any VAT charged by the principal. Timing differences in those flows can affect cash. If it’s cross-border, maybe the principal’s charge came without VAT (out of scope export), but you still charge local VAT – you become the sole VAT payer in chain, impacting your pricing and working capital. Bad debt risk: If a customer doesn’t pay, a principal (or deemed principal) still owes the VAT (though relief may be available). Agents who are not principals generally only face VAT on their commission, not on entire sale values, reducing exposure. Additionally, permanent establishment and local tax: being a commissionaire might avoid creating a corporate PE for the foreign principal, but the commissionaire (local entity) then books the sales and profits, which might be taxed locally. Conversely, using a disclosed agent means the foreign principal books sales in country (risking a PE), but maybe agent’s margin is lower. These differences can change a group’s profit allocation and income tax profile, thus affecting overall cash taxes beyond VAT. [marcusward.co]
Place of Supply & Cross-Border Complexity: In services, if you’re agent vs principal, the place-of-supply might shift from where the principal is to where the agent is or vice versa. For example, Newey: if Newey was principal, UK VAT exemption applied; by inserting Jersey, they tried to shift place of supply to Jersey (outside scope). Many GST/VAT have special rules for “intermediary services” – e.g. EU B2B intermediary rule (place of underlying transaction), or India’s pre-2023 rule (intermediary services B2B were Indian-sourced). Mis-characterizing can lead to applying wrong place-of-supply rules – either not charging VAT when you should, or vice versa. On goods, chain transactions and trade compliance are affected: a commissionaire may take title to goods, which can mean they are the importer or exporter of record. That in turn determines who pays import duties, who can zero-rate exports, etc. If a distributor was actually a commissionaire, then perhaps the foreign principal remains the exporter of record; if that’s not recognized, customs paperwork might be wrong. [gov.uk], [kpmg.com]
Input VAT Recovery: The structure impacts who is entitled to recover input VAT on costs. In a disclosed agency, the principal is the one making the supply, so the principal must generally be the one to claim input VAT on related costs (even if the agent paid them, the agent would use “billable expense” mechanisms or act as a pure reimbursing conduit under pure agent rules). In an undisclosed agency, the commissionaire can claim input VAT on costs of the supply, as in Auto Lease where the commissionaire could recover VAT on fuel because it was deemed to buy the fuel. Operationally, this means accounting needs to route vendor invoices to the correct entity for VAT booking. If an invoice for advertising is issued to an agent but really relates to principal’s supply, you have to ensure VAT isn’t mistakenly reclaimed by the agent (that would be incorrect if agent is just an intermediary). Many companies centralize procurement – if they treat local subsidiaries as agents, they must be careful not to recover VAT centrally on supplies that legally belong to subsidiaries, and vice versa. Another scenario: self-billing of commissions – if principal self-bills plus VAT, the agent needs to claim that VAT. A mistake in identifying the role can result in VAT either unrecovered or over-claimed, both problematic. [bcajonline.org] [view.deloitte.nl], [view.deloitte.nl]
Audit and Compliance Complexity: Tax auditors often target agent/principal issues because errors are common and can yield significant underpaid VAT. Businesses need to have robust documentation (agency agreements, commission invoices, evidence of disclosure) ready to defend their VAT treatment. If you operate via commissionaire in many countries, that’s multiple VAT registrations and filings – increasing compliance burden. Some businesses choose simpler models (even if less tax efficient) to reduce compliance risk. However, with the rise of real-time digital reporting (e.g. Spain’s SII, Hungary’s RTIR), authorities cross-match data from different sides of a transaction. If your pattern (as agent or principal) doesn’t fit normal expectations (e.g., you issue a lot of invoices with “on behalf of” and no VAT), it might trigger automated scrutiny. [marcusward.co], [pinsentmasons.com]
Supply Chain and Incoterms Implications: For physical goods, whether a party is a commissionaire or a buy-sell distributor changes who bears risk at each point and how goods are shipped and titled. Incoterms (like FOB, DDP) in contracts need to align with the VAT character. If a principal is making the sale (disclosed agent scenario), the principal likely arranges transport/export; if a commissionaire, the commissionaire might take delivery then deliver onward. Mist aligning these can cause confusion: e.g. a commissionaire arrangement but using incoterms that imply the foreign principal delivers to customer – that mismatch can confuse VAT/customs treatment. In some cases, commissionaire models are used to streamline cross-border flows (principal sends bulk to commissionaire who holds stock and sells locally) – that can defer import VAT to commissionaire’s stage, which might or might not be beneficial.
E-invoicing/E-reporting considerations: Many jurisdictions now require electronic invoicing or transaction reporting. For instance, Italy mandates real-time clearance of invoices through SDI, and it requires correct seller details. If you incorrectly treat a transaction, the e-invoice might be rejected or misrouted. Peppol, as a network, similarly requires specifying the seller and buyer roles in standardized fields. If a platform is deemed supplier under law but continues to issue invoices showing the third-party seller as supplier, e-invoicing systems could mis-report transactions (e.g., the real supplier might not report, causing discrepancies in data matching). In countries with continuous transaction controls (CTC), tax authorities will see each invoice: a pattern of an intermediary issuing invoices in someone else’s name may raise questions. Businesses, therefore, must often adapt their ERP and billing systems when laws change the deemed supplier. For instance, when the EU introduced marketplace deemed supplier rules in 2021 for goods, marketplaces had to reprogram their systems to issue invoices in their own name for qualifying sales and to account for VAT, which was a huge operational project for those companies.

H. Main Challenges, Controversies, and Risks
Despite clear rules on paper, businesses face several challenges and grey areas in applying agency vs commissionaire concepts:

Legal Interpretation Challenges: Determining the exact point where an intermediary ceases to be an “agent” and becomes a “principal” can be complex. Agreements might be hybrid or poorly drafted. Gray area scenarios include franchises, consignee arrangements, drop-shipment facilitators, and online platforms with varying degrees of control. For example, is an online travel agent that can apply discounts an agent or a principal? Cases like HotelRoom Services and EasyJet have wrestled with such issues. Frequently, national courts may interpret criteria differently, leading to inconsistency. (The Adecco line of cases on temp staffing saw different VAT outcomes in different countries until the CJEU intervened.) Also controversial: applying commissionaire fiction to goods vs services inconsistently. Fuel cards jurisprudence created uncertainty until recent clarifications because the Court at times saw them as not true resupplies (financial service) vs now seeing EV charging as a resupply. These shifting interpretations create risk for companies as the law evolves.
Distinguishing genuine vs sham arrangements: Tax authorities are alert to people labeling something as an “agency” purely for tax advantage (e.g., to treat themselves as not the supplier and avoid VAT). The abuse of law doctrine (as in Newey/Ocean Finance) is itself a challenge: it’s inherently a bit subjective when an arrangement is “wholly artificial.” Taxpayers might think their structure is commercially justified (maybe for regulatory reasons, etc.), whereas a tax authority cynically sees it as VAT avoidance. This creates uncertainty – even if you tick the boxes form-wise, the risk of recharacterization remains if the tax authority believes the principal is a shell. This is a legal risk that must be managed with robust evidence of non-tax business purposes for the arrangement. [pinsentmasons.com], [pinsentmasons.com]
Process/System Challenges: Implementing the correct VAT treatment for agent vs principal in ERP systems is not trivial. It requires different invoice workflows, possibly multiple VAT registrations, and correct tax determination logic. Businesses often struggle if their systems aren’t flexible: for instance, many standard configurations assume either a buy-sell model or a straightforward commission model, but not a mix depending on transaction. As previously mentioned, e-invoicing mandates add pressure: a system must output data differently for agented vs direct sales. These transformations are costly and time-consuming – and errors during transition can lead to compliance breaches. Real-time reporting means mistakes in classification might result in immediate penalties or transaction blockage.
Financial vs VAT treatment misalignment: Sometimes, accounting standards and legal VAT treatment diverge. A company might treat a transaction as an agent for revenue recognition (not showing gross sales on P&L) but legally be the principal for VAT. This could happen if an accounting rule says you’re an agent (no inventory risk, etc.), yet contract law says you act in own name. Then you’d have to charge VAT on full amount (as principal) but only record net revenue in accounts – the VAT reconciliation can get confusing. Conversely, you might be principal in accounting but an agent for VAT (less common, but possible with consignment situations). These mismatches can complicate internal controls and tax returns preparation.
Industry-specific issues: Certain sectors have bespoke rules: e.g., travel agents in the EU use the TOMS (Tour Operators Margin Scheme), which negates the agent/principal question by taxing only the margin regardless (but only if they act with customers in their own name). That creates a wedge: if they act as a disclosed agent of a hotel, they’re outside TOMS but have to charge VAT on commission fees; if they bundle as principal, they use TOMS (which may be beneficial or not depending on input VAT). Determining which regime applies is tricky and been subject of disputes (as referenced in Alpenchalets or Skatterverket v Loft cases). Insurance and finance: intermediation is often exempt, but what if you are a platform bringing insurers and clients together? Are you an exempt insurance broker (agent) or providing a taxable IT service? The CJEU TIB case dealt with a car rental platform and found it wasn’t an insurance broker (so no exemption). Companies in those sectors have to tread carefully to not lose exemptions by inadvertently shifting from agent to principal role. [marcusward.co]
Audit and Dispute Trends: VAT authorities increasingly exchange information internationally, so they catch instances where, e.g., a principal says “my local partner was a commissionaire” but that local partner’s country treats them as agent – leading to one of the supplies going untaxed. These mismatches are ripe for audit. Also, digital economy is a hot audit area: after new rules, authorities like the EU’s and UK’s check if marketplaces are properly applying the deemed supplier rules (for goods after 2021, for services after 2015). We saw some early controversies for Amazon, eBay regarding liability for VAT on third-party sales; law changes resolved much but enforcement is ongoing. Domestically, tax authorities focus on sectors like labor supply (to see if businesses are trying to exempt stuff by saying “we’re just agents for nurses/IT contractors” – e.g., UK’s long-running Adecco litigation ended with decision that the agency was principal for temp staff VAT). Another risk: if you fail to recognize you are an undisclosed agent, two things can happen – your principal might also account for the VAT (duplicate tax), or worse, neither of you do (VAT loss). The latter is obviously an audit target, but even duplicate taxation is an issue requiring cross-border coordination to fix. [marcusward.co]
Permanent Establishment (PE) Confusion: As mentioned, the activities of an agent or commissionaire can create a direct tax PE under tax treaties if the agent has and habitually exercises authority to conclude contracts for the foreign company. Historically, using a commissionaire in a country could avoid a PE because formally the commissionaire contracts in own name (the foreign company isn’t bound to the customer). For instance, the French Zimmer case held no PE for a foreign principal using a local commissionnaire. However, the recent OECD BEPS updates (post-2017) changed the PE definition to catch commissionaire-like arrangements (if the person plays the principal role in habitually concluding contracts for the foreign enterprise). This convergence of VAT concept and direct tax concept can cause confusion: a setup might be VAT-efficient but now triggers corporate tax in market countries. Companies must reconcile these – sometimes the optimal VAT structure (no local VAT registration for principal) might increase corporate tax exposure. Conversely, avoiding PE could mean using a true agent, but that might force the principal to VAT register. So planning requires a holistic tax approach, balancing VAT and direct tax outcomes. [tax.lynchp…ulting.com]
New economy models: Gig economy and platform setups continuously test the boundaries. Are ride-share drivers agents of the platform or independent principals using a service? For VAT: the EU tends to deem platforms as suppliers of transportation now (e.g., many countries have ride-hailing-specific rules). For direct taxes: classifying such relationships (employee vs contractor vs agent) has separate ramifications. The classification for VAT might not match labor law classification. We see an emerging challenge in aligning these. Also, cryptocurrency and digital assets: If an exchange facilitates trades, is it a broker (likely yes) and those services might be exempt as financial intermediation (if crypto is treated as currency) – but not all countries agree on that. It’s a developing area with uncertain VAT character, creating risk of missteps.

I. How to Anticipate and Manage the Concept (Taxpayer Playbook):
Businesses can take proactive steps to handle agency/commissionaire issues and reduce risk. Here’s a playbook for anticipating and managing these scenarios:

Governance & Controls: Establish clear policies for engaging intermediaries. The tax or finance team should be involved early in any decision to operate via a third party, reseller, or platform model. A governance checklist can ensure that commercial colleagues know the importance of contract wording on VAT. For example, require that any proposal to use an “agent” or “distributor” is reviewed by tax counsel to decide if it’s a true agency or a buy-sell. Implement controls in billing systems: e.g., a flag for “Is this a third-party sale via agent? Via marketplace?” that dictates how the invoice is generated. Ensure internal audit periodically checks that these controls are working (since staff turnover might lead to mistakes in how deals are structured or recorded).
Contracting & Operating Model Alignment: Align contracts with the actual supply chain. If you want an arrangement to be treated as disclosed agency, make sure the contract explicitly states the agent is acting in the name of the principal, and include obligations like passing on of title directly to customer, principal being identified on documents, etc.. Conversely, if using a commissionaire, the contract should grant the commissionaire the right to transact in its own name and should avoid language that undermines that (e.g., don’t say “the agent sells on behalf of principal” if you intend a commissionaire). Provide contract templates and training to business units so that they use correct terminology. Remember, substance matters too – the operating model (order process, customer comms, risk assumption) must match the contract. It’s helpful to draw flowcharts: who does what from customer’s perspective? Use those to confirm VAT positions. [bcajonline.org], [simmons-simmons.com]
Documentation Package: Maintain a robust set of documentation justifying the chosen VAT treatment:
- Contracts/Agreements: Keep signed copies of all agency or distribution agreements and ensure they are up-to-date. If verbal arrangements exist (not ideal), document them via memos or emails.
- Invoices and Evidence of Disclosure: If operating as agent, archive examples of communications/invoices where the principal is named to prove disclosure. If commissionaire, keep evidence that you take title or that customers contract with you (e.g., order forms, terms of sale listing you as seller). [bcajonline.org]
- Rulings/Advice: If you have any advance rulings or written advice from tax authorities on your model, preserve these and ensure operations continue to follow any conditions in them.
- Transactional records: If audited, you may need to demonstrate how a sample transaction flowed. Keeping clear records (purchase orders, delivery notes, who paid whom, etc.) and mapping them to the contract terms will help show consistency of practice with contractual allocation of roles.
Monitoring & Periodic Reassessment: Regularly review your intermediary arrangements, especially when laws change or your business model evolves. For instance, with new VAT rules on marketplaces, a platform that was an agent last year might now be deemed principal – you must pivot accordingly. Consider an annual “intermediary role audit”: list all cases where you rely on third parties to deliver or sell, and verify if the VAT treatment is still correct. Also monitor court rulings (CJEU, local courts) for developments that might affect you. For example, after Fenix, any digital platform should double-check if they fall under similar conditions. If you’re expanding to new countries, research local peculiarities (like UAE’s recent agent rule for place-of-residence or India’s intermediary rule changes). [simmons-simmons.com], [simmons-simmons.com] [tax.lynchp…ulting.com]
Systems and Tech Solutions: Work with IT to configure your ERP/Tax engine to handle these flows. This might involve:
- Setting up multiple VAT registrations in one system instance (if commissionaire in many countries).
- Using the “sold-to” vs “bill-to” fields cleverly: e.g., in SAP, some use the concept of a partner function for “Invoicing party” to reflect principal’s details on invoices even if transaction posts to agent’s accounts.
- If using OSS (One Stop Shop) in the EU, ensure that only the correct sales feed into the OSS return. If you’re a platform, you might have to file OSS for marketplace sales, but not for your own direct sales which you report in domestic return – that distinction must be automated.
- Implementing VAT codes for agent scenarios. Some companies create a specific tax code for “agency commission – zero rated as disbursement” vs “agency service – standard rated” to apply when passing on principal’s charges vs charging own fees, etc., to avoid accidentally adding VAT where not needed or vice versa.
Training and SOPs: Provide training to sales, procurement, and accounts payable teams about these differences. They should know, for example, that if they incur costs on behalf of a client and we are an agent, they must get the supplier to issue the invoice in the name of the client (under “pure agent” concept) – otherwise our recovery might be disallowed and/or we might inadvertently create a supply. Standard Operating Procedures (SOPs) should dictate steps: e.g., “If acting as intermediary, do X with invoices.” Particularly, instruct customer-facing staff on marketing language: If we are acting as an agent, the customer communications should make that clear (the customer should know they are buying from the principal with our help). [bcajonline.org]
Key Performance Indicators (KPIs) and Monitoring: Develop KPIs related to these arrangements. For instance: Percentage of transactions with correct VAT treatment vs. total for agency/commission models – if it’s less than 100%, figure out what’s slipping through. Monitor the volume of self-billed commissions vs regular sales to ensure they align with expectations (if an agent model is in place but self-billed commissions are zero, something’s wrong; conversely, if commissions are half the value of goods sold, maybe you structured incorrectly). Use internal audit or data analytics to flag any transactions where, say, revenue was recognized net (as an agent) but VAT was accounted on gross – an anomaly to investigate.
Contingency Planning: Plan for worst-case scenarios: what if a tax authority successfully reclassifies your arrangement? Would you owe 5 years of VAT? Can you get reimbursement from someone (e.g., from the principal or customers)? Often customers can’t be retro-charged VAT (especially consumers), so that cost would hit you. Consider contract clauses that address tax recharacterization – for example, some principal-agent contracts stipulate what happens if tax law deems an agent to be a distributor (who bears the cost?). Implementing an indemnity clause might at least create a right to recover some tax from the counterparty if things go awry (though in B2C context, you’re likely stuck). Also consider voluntary disclosure to tax authorities if you discover a mistake – proactive correction can reduce penalties.

By following this playbook – aligning legal form and function, maintaining documentation, and keeping systems and teams up-to-date – businesses can substantially mitigate the risk of VAT surprises related to agency and commissionaire arrangements.

J. Common Misconceptions (and the Reality)
There are many myths and misunderstandings about VAT treatment of agents and intermediaries. Here are some common misconceptions, debunked:

Misconception: “If our contract says ‘agency’, it’s automatically a disclosed agency for VAT.”
Reality: Not necessarily. VAT treatment is based on actual behavior and contract terms in substance, not just labels. If the “agent” acts in their own name, sets terms, or is largely indistinguishable from a seller in the customer’s eyes, tax authorities can deem it an undisclosed agent (commissionaire) no matter what the contract is titled. Always ensure the contract and the execution both reflect a truly disclosed agency (with the principal fully on display) if that’s the intended VAT treatment. [bcajonline.org], [pinsentmasons.com] [kpmg.com], [pinsentmasons.com]
Misconception: “Using a commissionaire in a country means the foreign company has no tax presence there.”
Reality: For VAT, a commissionaire can indeed localize the VAT obligations (the commissionaire registers and handles local VAT). But for corporate tax, commissionaire arrangements can still create a permanent establishment under updated international rules if the commissionaire effectively acts on behalf of the foreign company in concluding contracts. So while VAT might be handled, don’t assume the corporate tax authorities will ignore your presence. Coordination between VAT and direct tax planning is necessary. [gov.uk] [tax.lynchp…ulting.com]
Misconception: “We don’t need to charge VAT on flows between a principal and agent.”
Reality: If it’s a true disclosed agency and the agent is just passing money (like a reimbursed expense or collecting payment on behalf), certain flows can be outside scope or regarded as disbursements. However, if the agent is an undisclosed agent, the principal’s “payment” to the agent is actually the price of an intermediate supply and is subject to VAT. Also, an agent’s commission is nearly always a taxable service (unless a specific exemption like insurance/financial brokerage applies). So don’t assume all between principal/agent is off-VAT; analyze each flow. [bcajonline.org] [marcusward.co]
Misconception: “If it’s B2B, it doesn’t matter – the VAT is recoverable anyway.”
Reality: While input VAT is generally recoverable for businesses, getting it wrong can still cost you. You might miss out on zero-rating or VAT simplifications if you mis-classify. For example, if you treat a supply as outside scope via an agent but it was actually a local supply via commissionaire, you could owe local VAT – your customer (if also business) might have been able to recover it, but if time has passed or they are not VAT-registered, they can’t, so you face a gross cost. Or you might pay unnecessary VAT: e.g., incorrectly treating something as two supplies could lead to unrecovered VAT in one leg if not setup properly. Also, cashflow and penalties matter even in B2B. Overlooking VAT for years and then finding out it should have been charged can lead to company-paid assessments with interest. Moreover, even if your customer can recover VAT, they won’t be pleased to get a retroactive charge (and might refuse to pay it, leaving you holding the bill). Lastly, some B2B clients (like banks, schools) can’t recover VAT – so mischarging them can raise real costs or disputes.
Misconception: “We can freely choose whichever model yields the best VAT outcome.”
Reality: Your flexibility is constrained by commercial and legal realities. Some products or industries require a certain model (regulations might mandate a local distributor or agent). Tax authorities may challenge structures that seem chosen solely for VAT benefits (anti-avoidance). Also, changing a model just to save VAT could have other tax implications (PE, transfer pricing, etc.). So while tax efficiency is a factor, it can’t be the only driver – and choices should be supported by a business rationale. In short, you can optimize, but you cannot just assume any form without considering these factors.
Misconception: “A digital platform is always just an intermediary, not the seller.”
Reality: Modern VAT laws increasingly treat platforms as deemed sellers for certain transactions. If you run a platform, you might be the one on the hook for VAT even if you consider yourself a marketplace. Conditions vary, but generally if you facilitate the supply and set essential terms or handle payment, you’re likely a deemed supplier for VAT (at least in the EU, UK, and similar jurisdictions). For goods, the EU and places like Australia and UK have put the onus on online marketplaces to collect GST/VAT on behalf of overseas vendors. So the age of “we’re just a tech platform, not a seller” is over in many cases.
Misconception: “If the agent and principal are in the same VAT group, we can ignore these rules.”
Reality: VAT grouping can simplify some internal transactions (supplies between group members are disregarded for VAT in some countries). However, the treatment to outside parties is unaffected – you still need to assess how the group transacts with third-party customers or vendors. If agent and principal are in one VAT group, effectively they are a single taxable person to the outside world, so any supply by either to a third party is just the group’s supply (the concept of acting in name of another within the group becomes moot externally). But if you misapply that – e.g., failing to charge VAT to a customer because you thought it was internal – that’s an error. Also, not all countries allow cross-border VAT grouping, so principal and agent may not be groupable if in different states.
Misconception: “An agent never has to worry about VAT registration in countries where they operate for a foreign principal.”
Reality: A disclosed agent may avoid needing to register in the customer’s country if they’re truly just facilitating (the principal likely registers instead). But an undisclosed agent (commissionaire) is the one who must register wherever the supplies take place. Also, some countries require tax representatives or other formalities for foreign principals, even with agents. For instance, Japan requires a “tax agent” for non-residents doing taxable business, which can include certain agency scenarios. GCC countries might require the agent to report on behalf of a foreign principal (some had concepts of “tax agent” vs “commercial agent” to not confuse with our usage). In summary, agents must consider local rules: occasionally, a local agent might be deemed a “facility or fixed establishment” of the foreign principal for VAT if not careful, pulling them into local registration anyway. Know the local compliance obligations for both parties in an agency deal. [gov.uk]
Misconception: “If we reimburse our agent’s expenses at cost, there’s no VAT because it’s just a reimbursement.”
Reality: Tax law has strict rules for when a reimbursement can be outside the scope of VAT as a “disbursement” (pure agent) vs when it’s part of the consideration for a supply. If an agent pays a supplier on your behalf and meets all “pure agent” criteria (supplier knew principal was the real buyer, invoice in principal’s name, agent just facilitated payment) then yes, the passed-through expense can be outside scope for VAT. But if those conditions aren’t met, the agent’s onward charge of that cost is itself a supply and may require VAT. Many mistakenly assume “reimbursement” isn’t taxable – but unless structured as a disbursement, it usually is (as part of the agent’s service or a separate re-supply). Always check if you can satisfy the disbursement rules before treating any recharge as non-taxable. [bcajonline.org]
Misconception: “Permanent establishment definitions don’t affect VAT agency questions.”
Reality: Actually, the concept of a “fixed establishment” in VAT is related. If a company has a fixed establishment in a country (e.g., significant human/technical resources), that establishment may be considered the supplier or recipient for certain cross-border services (affecting place of supply). An agent’s presence can give rise to a fixed establishment of the principal for VAT if the agent has enough authority and facilities exclusively for that principal – though this is a high threshold. Additionally, as mentioned, the agency could create a direct tax permanent establishment. So while PE is a direct tax concept, it and the VAT fixed establishment concept both can be triggered by having agents. Companies often mistakenly focus on one and not the other. The interplay is technical, but should not be overlooked in structuring – ensure your positions on VAT fixed establishment and direct tax PE are consistent with how you view the agent’s role. [view.deloitte.nl], [view.deloitte.nl]

K. Practical Checklist (for businesses dealing with agency/commissionaire scenarios):

Use this checklist to evaluate and manage your VAT/GST obligations in agency vs intermediary arrangements:

Identify the Role – Determine for each third-party arrangement: are we the principal, a disclosed agent, or an undisclosed agent (commissionaire)? Map out the transaction from order to fulfillment to invoicing to payment to see who does what. [kpmg.com], [kpmg.com]
Know the Law in Each Jurisdiction – Document the local VAT/GST rules for agents/commissionaires in all countries of operation, including any special conditions or definitions (e.g. Canada’s “agent for customs” vs “agency” differences, or Malaysia SST’s approach, etc.).
Contract Review – Review all contracts with distributors, sales agents, commissionaires, etc. for language around title transfer, acting capacity, invoicing responsibilities. Ensure they are consistent with desired VAT outcomes. Use clear phrases: e.g., “Agent acts in the name and for the account of Principal” for disclosed agency. [marcusward.co]
Invoice and Tax Clause – Ensure contracts have a VAT clause: specify who will charge VAT on which amounts, and that parties will cooperate on correct invoicing and tax compliance (and possibly indemnify each other for mischarged VAT).
Master Data in Systems – For each relevant customer or scenario, set up appropriate flags in your ERP (e.g., designate customers handled by commissionaire vs direct). If you are a commissionaire, your system needs to treat the sale as yours; if agent, maybe the sale isn’t recorded as your revenue – but then your fee needs separate billing. Align system settings with correct approach.
Training Stakeholders – Train sales and operations on what they can/can’t promise. For instance, a sales agent (disclosed) should not negotiate contracts as if they were the seller (to avoid inadvertently becoming an undisclosed agent). Likewise, train billing departments on how to handle pass-through expenses (to use the pure agent rules properly if applicable). [kpmg.com]
Monitor Law Changes – Stay updated on VAT law changes: e.g., new digital platform rules, threshold changes for marketplace deemed supplier, or changes like India’s removal of intermediary special place-of-supply rule in 2026 – these can alter your VAT obligations significantly. Assign someone or use a service to keep track of indirect tax developments in all relevant jurisdictions.
Audit Trail – Maintain a clear audit trail for transactions. For any given transaction via an agent/principal, be able to produce: the contract, the purchase order, the invoice to customer, the invoice between principal and agent (if any), proof of delivery, proof of payment flows. This helps resolve any challenges by authorities by showing the full picture.
Rulings if Uncertain – If substantial revenue is at stake and the law is ambiguous, consider seeking an advance ruling from the tax authority. Many jurisdictions offer this (e.g., EU Member States’ private rulings or IRS in the US on sales tax issues). A ruling can provide certainty (e.g., confirming that a specific model is considered a disclosed agency and thus only commission is taxable) – useful given potential penalties for mistakes.
Integrate VAT in Business Planning – When designing new sales channels (like launching a marketplace or using a new distributor), include VAT structuring in the planning stage. Simulate the VAT outcomes of different models (agency vs buy-sell vs consignment) in terms of tax cost, pricing, compliance burden and choose holistically.
Check Insurance for VAT – Check if your company’s insurance (like professional indemnity) covers indirect tax errors or if you have tax liability insurance. Given the potentially large amounts (e.g., 20% of gross sales for years), some companies opt for insurance for tax audit risks. Not a substitute for compliance, but a backstop.
Permanent Establishment Analysis – Work with direct tax colleagues to evaluate if your agent relationships might trigger a PE after BEPS changes. Ensure that if you restructure to avoid PE, you also reconsider the VAT flows (they might change if you shift from commissionaire to distributor or vice versa).
Scenario Testing – Internally test scenarios: “If country X tax authority says we’re not agents but principals, what happens?” Quantify the exposure. This can be part of risk management. Have a plan for remediation (e.g., can we quickly switch to the correct model going forward? Can we engage authorities to negotiate a settlement?).
Consumer Communications – If selling to consumers through third parties, control how those third parties present the sale. For instance, if you’re using an agent but the agent’s website looks like AgentCo selling a service, you might inadvertently become the deemed supplier. Encourage or require co-branding or statements like “AgentCo, acting on behalf of PrincipalCo” on websites or receipts for transparency. [kpmg.com], [kpmg.com]
Continuous Improvement – After each audit or significant transaction, do a post-mortem. If an issue was flagged (even if no assessment), fix the process. Use technology if possible: some companies use AI to scan contracts for risky language (like “in its own name”) to alert tax when an agent contract might be misworded.

L. Top 10 Takeaways:
For a quick executive digest, here are the top ten key points from this discussion:

Same deal, different VAT: The way you structure a sale – as a direct sale, through a disclosed agent, or via an undisclosed agent (commissionaire) – can completely change who owes VAT and where, even if the commercial result is similar. [marcusward.co], [kpmg.com]
Disclosed vs Undisclosed Agents: A disclosed agent acts in the name of a principal, so VAT is charged only on the principal’s supply (agent’s commission is a separate service). An undisclosed agent/commissionaire is deemed to buy and re-sell; they must charge VAT on the full sale and can recover VAT on inputs. [marcusward.co] [marcusward.co], [kpmg.com]
Global variations exist: Most VAT/GST systems follow the core principle that acting in one’s own name triggers a “deemed supplier” fiction, but details vary. Know local rules (e.g., UK’s Section 47, UAE’s recent agency rule, India’s invoice test) to avoid surprises. [kpmg.com] [gov.uk], [tax.lynchp…ulting.com]
EU = harmonized (and expanding): The EU’s Article 28 and related rules (Implementing Reg 282/2011 Art.9a, e-commerce rules) have expanded the undisclosed agent concept to digital platforms and marketplaces. The CJEU is actively clarifying these rules (OnlyFans, App Store, EV charging cases) – generally to ensure intermediaries are liable for VAT where appropriate. [kpmg.com], [view.deloitte.nl]
Documentation is key: Whether you’re principal or agent, paperwork needs to reflect it. Contracts, invoices, and even websites should clearly indicate who the supplier is. Tax authorities often decide based on what the customer was told (order forms, T&Cs) and how billing was done, not just internal agreements. [bcajonline.org], [kpmg.com]
Operational impact: Choosing agent vs distributor affects practical things – VAT registrations, invoicing, ERP setup, cash flow. Commissionaire models mean you handle VAT in-market; agency might push VAT to the principal. Make sure your finance systems can handle whichever model you use.
Risks of misclassification: If you get it wrong, you face possible VAT assessments, penalties, and unhappy customers/partners. Common pitfalls include assuming a “reimbursement” isn’t taxable when it is, or not charging VAT because you thought you were an agent. Auditors are watching these areas, especially in multi-party digital transactions. [pinsentmasons.com], [simmons-simmons.com]
Do a holistic tax analysis: Consider corporate tax and regulatory angles too. The ideal VAT solution (e.g. commissionaire to simplify VAT) might trigger a taxable presence for income tax or regulatory issues. Balance the pros and cons across all taxes and legal obligations.
Recent trends favor tax authorities: Laws are being tightened to ensure someone is always liable for VAT (e.g., marketplaces). Substance-over-form is enforced – purely tax-driven agent structures can be recharacterized (as in Newey). Businesses should err on the side of economic reality when structuring deals. [pinsentmasons.com], [pinsentmasons.com]
Proactive management saves money: It’s far cheaper to structure it right upfront than to clean up after. Use the provided checklist and playbook: get your contracts and processes right, educate your team, and seek rulings for peace of mind. Being proactive can turn a VAT minefield into a manageable part of operations.

M. Board-Level Summary (5 bullets): (Key strategic points for senior management)

VAT Strategy & Business Model: The way we engage third parties (agents, distributors, platforms) isn’t just a legal formality – it directly affects where and how much VAT/GST we pay. A “simple” change in contract structure can mean a 20% swing in costs on every sale. The Board should ensure that business models are designed with indirect tax efficiency in mind, without compromising compliance. [marcusward.co], [kpmg.com]
Global Consistency & Compliance: Our international operations must navigate different VAT rules for intermediaries (EU, UK, Asia, etc.). Inconsistency or misunderstanding here could lead to double taxation or missed taxation. At Board level, reinforcing a culture of tax compliance and consultation across divisions will mitigate costly surprises. [gov.uk], [pinsentmasons.com]
Risks & Provisions: There is risk of tax authorities recharacterizing some of our arrangements (especially in the digital/online sectors). We may face back-dated tax claims if we or our partners have taken a wrong approach. The Board should be aware of any significant exposures (quantified via internal audit) and consider maintaining provisions or reserves for such eventualities, as well as possibly tax insurance.
System Investments: To comply with evolving VAT rules (like e-invoicing, real-time reporting, marketplace liability), we likely need continued investment in our IT and billing systems. These investments ensure we can adapt quickly to law changes (for example, if a country decides platforms must collect VAT, we can comply from day one). Board support for these projects is crucial for avoiding penalties and maintaining smooth operations. [simmons-simmons.com], [simmons-simmons.com]
Holistic Structuring: Decisions about using agents or distributors should involve tax, legal, and commercial teams jointly. The Board should endorse cross-functional reviews for new market entries or channel changes, to optimize the overall tax position (VAT, customs, corporate tax) while aligning with business goals. In summary, VAT considerations should be part of strategic planning, not an afterthought – this prevents value leakage and protects shareholder value.

N. Tax Team Action Plan (10 bullets): (Operational steps for the tax department and related functions)

Inventory All Intermediary Arrangements: Immediately create (or update) a matrix of all our sales and purchase intermediary relationships worldwide – noting for each whether they are treated as agent (disclosed/undisclosed) or principal, and the current VAT treatment in practice.
Risk Assessment: For each arrangement in the matrix, perform a risk review: is the VAT treatment clear and correct? Flag high-risk ones (e.g., where revenue is significant and treatment is based on a borderline call, or where local law just changed). Present these findings to management with recommendations.
Align Contracts & Reality: Work with Legal to review and, if needed, amend existing contracts to ensure terminology and obligations match the intended VAT treatment. If any agents need to start revealing the principal’s name to customers (to achieve disclosed agency), coordinate with Sales/Marketing to implement that operationally (e.g., update website, templates).
Training Sessions: Set up training for sales ops, accounting, and customer service in each region. Use real examples to illustrate what’s an agent vs a reseller and why it matters (e.g., show how an invoice should look in each case). Emphasize to teams: before setting up a new third-party deal, involve Tax early. [bcajonline.org]
Update SOPs/Guidelines: Revise internal guidelines and manuals to include clear instructions on handling VAT for agent/principal scenarios. For instance, Expense Reimbursement Policy: add criteria for when to treat reimbursements as out-of-scope disbursements (with checklist: invoice in principal’s name, etc.). [bcajonline.org]
Systems Configuration: Collaborate with IT to ensure our billing and ERP systems correctly handle current arrangements. Implement any needed changes – e.g., new tax codes for commissions, enabling multi-party billing. Test these configurations with sample transactions (e.g., a sale via commissionaire vs via agent) to confirm tax is applied as expected on invoices and reports.
E-invoicing Readiness: In countries moving to e-invoicing (e.g., France, Poland), verify that our treatment of agency/principal is correctly reflected in the e-invoice data. Plan to use the appropriate fields to indicate if we’re issuing an invoice on behalf of a principal, etc., or avoid such scenarios if not allowed. Engage providers or our software vendor if custom development is needed.
Monitoring Legal Changes: Assign a tax team member to monitor and circulate updates on indirect tax law changes regarding intermediaries. For example, if the EU were to extend platform deeming to more sectors, or if another country follows the UAE in attributing principal residence to agent location, we want to know ASAP. Subscribe to tax news services or join industry groups for heads-up. [tax.lynchp…ulting.com]
Liaise with Key Partners: If we rely on third-party platforms or agents (like Amazon Marketplace, etc.), open communication about VAT responsibilities. Ensure they are handling their side (like collecting VAT we might be offloading to them). Also, if any principal companies use us as agent, make sure we understand our obligations in those roles and have agreements on VAT handling (like who issues invoices to customers).
Contingency / Corrections: Develop a plan to correct course if an error is found. This includes how to approach tax authorities (voluntary disclosure vs wait for audit), how to compensate or notify customers if needed, and ensuring proper back-up documentation to mitigate penalties (“reasonable care” defense by showing we had processes, but maybe an isolated slip). Essentially, have a playbook so that if tomorrow an audit query comes, the team isn’t scrambling – they know where contracts are, how our systems are set up, and what our legal arguments and plan B would be.

O. Sources & Further Reading: (Authoritative references by category.)

EU Law & Guidance:

Council Directive 2006/112/EC (EU VAT Directive) – Art.14(2)(c) and Art.28 define commission transactions and undisclosed agent rule. Consolidated text available at EUR-Lex: <https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02006L0112-20210701>.
Council Implementing Regulation (EU) No 282/2011 – Art.9a (introduced by Reg 1042/2013) deems certain electronic platform intermediaries as acting in own name. See Art.9a text and conditions in Simmons & Simmons summary. EUR-Lex: <https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02011R0282-20190101>. [simmons-simmons.com], [simmons-simmons.com]
EU VAT Committee Guidelines (Sept 2023) on Fuel Cards – Clarifies commissionaire vs financial service in fuel card chains. (Working Paper No. 1067). Summary by KMLZ: <https://www.kmlz.de/en/fuel-cards-commissionaire-scheme-chain-supply-vat-committees-guidelines-working-paper>.
OECD International VAT/GST Guidelines (2017) – General framework for neutrality and identifying “supplies” in multi-party transactions. (Chapter on intermediary services highlights need for clarity on supplier identity). OECD: <https://www.oecd.org/tax/consumption/international-vat-gst-guidelines-2017.pdf>.

CJEU Cases:

Auto Lease Holland BV v Bundesamt (C‑185/01, 2003) – CJEU judgment on fuel card commissionaire: intermediary deemed to supply fuel. EUR-Lex: <https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62001CJ0185>. [view.deloitte.nl], [view.deloitte.nl]
Belgian State v Henfling (C‑464/10, 2011) – Betting commissionnaire exempt status confirmed. EUR-Lex: <https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62010CJ0464>. [vatupdate.com], [vatupdate.com]
HMRC v Newey (Ocean Finance) (C‑653/11, 2013) – Substance over form in agent vs principal, abuse of law. EUR-Lex (summary): <https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62011CJ0653>. [pinsentmasons.com], [pinsentmasons.com]
Fenix International (OnlyFans) (C‑695/20, 2023) – Validity of Art.9a IR 282/2011, platform deemed supplier. Judgment: <https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62020CJ0695>.
X (“App Store” case) (C‑101/24, 2025) – Electronic marketplace as undisclosed agent pre-2015. (Press release and analysis available via KPMG). [kpmg.com], [kpmg.com]
Skatteverket v Digital Charging Solutions (C‑60/23, 2024) – EV charging commissionaire = buy-sell of electricity. EUR-Lex: <https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62023CJ0060>. [view.deloitte.nl], [view.deloitte.nl]

National Guidance & Legislation:

HMRC VAT Manuals (VAT Notice 700, VAT Taxable Person Manual) – UK guidance on agents, indicators of agency vs principal, Section 47 VATA. HMRC Manual Reference: VTAXPER37000 and VTAXPER37950 (Agent: disclosed/undisclosed). Available on GOV.UK. [gov.uk] [gov.uk], [gov.uk]
German UStG §3(11) and UStAE (Application Decree) 3.15 – German law on Dienstleistungskommission (services commission) and goods commission. See UStAE 3.15(1): “If an entrepreneur (commission agent) in providing a service acts in his own name for another, then a legal fiction of two services applies…” (German: “Wird ein Unternehmer… in die Erbringung einer sonstigen Leistung als Vermittler eingeschaltet und handelt er im eigenen Namen für fremde Rechnung, gilt die Leistung als an ihn und von ihm erbracht.”) (NWB database [in German]).
France BOFiP (Tax Bulletin) – TVA – Guidelines on agents (agents transparents) vs commissionnaires. BOI-TVA-BASE-10-1 (especially section on personnes interposées). Emphasizes the requirement that for an intermediary not to be taxed on the main supply, the identity of the principal must be disclosed to the client. (In French, available on bofip.impots.gouv.fr). [gov.uk], [gov.uk]
UAE VAT Public Clarification VATP004 (March 2021) – “Simplifying VAT for agency functions”. Explains when a person is a disclosed vs undisclosed agent under UAE VAT, with examples, and new Article 33 rule on place of residence. On FTA website (tax.gov.ae) or via tax bulletins. [grantthornton.ae] [tax.lynchp…ulting.com]
Indian GST – CBIC Circular No. 57/31/2018-GST – Clarification on scope of principal-agent under Schedule I. Confirms criterion of invoice issuance in agent’s name. (Available on CBIC website, dated 4 Sept 2018). Also see recent update: Withdrawal of intermediary special POS rule (Finance Act 2023) – TaxGuru article by Bimal Jain. [bcajonline.org]

OECD/Other:

OECD Commentary on Agency PE (BEPS Action 7) – While not VAT, for awareness: changes to Art.5(5) of OECD Model Tax Convention (2017) make commissionaire arrangements more likely to create a permanent establishment. See OECD, “Preventing the Artificial Avoidance of PE Status,” 2015 Final Report. [tax.lynchp…ulting.com]
“Disclosed versus Undisclosed Agents in EU VAT” – C. Amand, Int’l VAT Monitor (IBFD) 2021 – scholarly article analyzing Fenix and the general test for acting in own name. (IBFD Journal Article, Sept 2021). [shop.ibfd.org]
KPMG & Deloitte Tax Alerts (various countries) – e.g., KPMG TaxNewsFlash on CJEU Xyrality 2025; Deloitte VAT Alert on Digital Charging Solutions 2024 – provide practical summaries. [kpmg.com] [view.deloitte.nl]
AccountingWeb “Clarification on VAT between agent & principal” (2024) – Q&A style discussion of common issues in distinguishing agent vs principal in UK practice. (A useful digest for practitioners, available on accountingweb.co.uk).

(This article is provided for general informational purposes and does not constitute legal advice. Businesses should consult professional advisors and consider local laws for specific scenarios. The author and publisher disclaim liability for actions taken based on this summary. Practice-based observations herein are drawn from typical scenarios and may not reflect official guidance in all jurisdictions.)